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N O V E M B E R 2 0 1 4T H E M A G A Z I N E F O R E T F A D V I S O R S ////////////////////////////////////////////////////
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2 New ETF Launches Guggenheim rolls out emerging market real estate ETF. Plus: Our monthly look at launches, filings and closures.
3 ETF Explainer: KOL Our ETF Explainer looks into the Market Vectors Coal ETF’s tumultuous year.
4 Profile Capital Management Group’s Stephen Blumenthal discusses his firm’s adoption of ETFs.
37 Why I Own: VNQI Portfolio Partners’ Rich Romey opts for the broad exposure of Vanguard’s global real estate ETF.
38 Sectors In Review September was a disastrous month for sectors; each one’s average returns were in the red.
40 ETF Data Our monthly databank breaks down ETF returns for every market segment.
DEPARTMENTS
Riding the Energy BoomIf you want targeted exposure to the U.S. energy boom, the Energy Select Sector SPDR ETF (XLE), an investor favorite, might not be the best choice.
Winners & Losers In CommoditiesThe disparity between the best and worst performers in the commodities space is considerable. What does that mean for investors?
Outlook For Gold: A SupplementGold is still making a slow recovery from its disastrous 2013 performance. ETF Report explores experts’ expectations, sources of demand and ETF choices.
Commodities: Unavoidably ActiveIndex choice matters in commodities – perhaps more than in any other asset class. Find out how differences in methodology can affect your portfolio.
812
2516
FEATURES
VOLUME 14 | NO. 1 1 Contents
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2 ETF.com/ETF Report
The Guggenheim Emerging Markets Real Estate ETF (EMRE) tracks an index from AlphaShares, the China-focused investment management company that boasts Burton Malk-iel as its chief investment officer. The fund is the first of its kind.
Its benchmark covers companies and real estate investment trusts that primar-ily develop, manage or own properties in markets that S&P Dow Jones Indices has classified as having emerging status, a press release said.
A fact sheet from Guggenheim indi-cates that at launch, the fund had 118
Guggenheim Emerging Markets Real Estate (EMRE)New fund is the first to cover developing market
holdings from 18 different markets. The fact sheet also highlights the growth of emerging markets’ presence in real estate securities from roughly 2% of the market in 2000 to 11% in mid-2014.
EMRE comes with a total expense ratio of 0.65%.
Until EMRE’s launch, there were no ETFs covering the broad emerging market space exclusively. However, the Vanguard Global ex-U.S. Real Estate ETF (VNQI|B-78) is the biggest fund in the international real estate space, with $2 billion in assets under management, and it has the largest weighting to emerging markets of all its competitors, at 13.68%.
VNQI’s expense ratio is 0.27%.
EMRE Quick ViewISSUER First Trust
SEGMENT Equity: Emerging Markets Real Estate
EXPENSE RATIO 0.65%
STRUCTURE Open-ended fund
DATE LAUNCHED 9/29/2014
COMPETING FUNDS TAO, RWX, VNQI
Source: ETF.com, Data and information as of 9/30/2014. ETF Filings sidebar covers launches and filings for the month of September.
NEW FUNDS
ETFLaunches
FEATURED ETF
ETF FILING ACTIVITY
US EQUITY
Barclays Return On Disability ETN
C-Tracks Miller/Howard Strat Div Reinvestor ETN
Deep Value
Etracs Monthly Pay 2xLev US HiDiv LoVol ETN
Stock Split
US FIXED INCOME
FlexShares Disciplined Duration MBS
Guggenheim BulletShares 2023 Corp Bond
Guggenheim BulletShares 2024 Corp Bond
Guggenheim BulletShrs 2021 HiYld Corp Bond
Guggenheim BulletShrs 2022 HiYld Corp Bond
PowerShares LadderRite 0-5 Year Corp Bond
INTERNATIONAL EQUITY
ARK Industrial Innovation
ARK Web x.0
Guggenheim Emerging Markets Real Estate
iShares Currency Hedged MSCI Emrg Mkts
Source Euro Stoxx 50
SPDR MSCI Mexico Quality Mix
SPDR MSCI South Korea Quality Mix
SPDR MSCI Taiwan Quality Mix
ALTERNATIVES
First Trust Long/Short Equity
SELECTED FILINGSBioShares Biotechnology Clinical Trials
CSOP FTSE China A50
EMQQ Emerging Internet
Global X | JPMorgan US Sector Rotator
iShares MSCI China A
iShares Short Maturity Municipal Bond
State Street Global Managed Volatility
40-APPSCSOP Asset Management
Goldman Sachs
CLOSURESEGShares China Infrastructure
EGShares TCW EM Intermdt Term Inv Grade Bond
EGShares TCW EM Long Term Inv Grade Bond
EGShares TCW EM Short Term Inv Grade Bond
Global X Canada Preferred
Global X Pure Gold Miners
By Heather Bell
15% US FIXED INCOME
18%US EQUITY
48% INT’L EQUITY
3% COMMODITIES
5% LEVERAGED
4% INT’L FIXED INCOME
3% INVERSE
2% ALTERNATIVES
3% ASSET ALLOCATION
ETFs155YEAR-TO-DATE
NOVEMBER 2014 3
Market Vectors Coal ETF
Each month, we look at an ETF selected by ETF.com, based on interviews with leading macro strategists from our Alpha Think Tank publication. This month, we look at the Market Vectors Coal ETF (KOL|C-20), based on Dennis Gartman’s view that coal remains the primary source of electricity generation around the world, and with coal stocks down 90-95% from their highs, it presents a great contrarian play.
Source: Bloomberg. Data for 9/23/2013 to 9/23/2014.
IN DETAIL
ETF Explainer: KOL
By Dennis Hudachek
SEP Moody’s warns that due to ongoing weak coal prices, Asian coal producers are likely to see pressure on their credit quality, with default risks increasing for some producers.
23MAY Turkey suffers its worst coal mining disaster in its history, with
an explosion in Soma, killing 301 miners.13
NOV The China National Coal Association forecasts that by 2020, China’s coal consumption will likely hit 4.8 billion tons, a big increase from the current 3.65 billion tons.
24JUN In a blow to the coal industry, the Obama administration unveils
a historic measure to cut carbon emission from power plants 30% by 2030 from 2005 levels.
2
MAY Stanford University announces that it will divest itself of coal companies from its endowment fund, citing climate change and socially responsible investing.
6SEP China announces plans to lower its share of coal in its energy
mix from its current 70% to under 62% by 2020 to cut greenhouse emissions and boost clean-energy development.
20
4
2
0
-2
-4
-6
-8
-10
-12
%
RETURN
KOL ETF
OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP
2014
-9.30%
SEP23
NOV24
MAY6
MAY13
JUN2
SEP20
KOL Quick View
ISSUER Van Eck
SEGMENT Equity: Global Coal
EXPENSE RATIO 0.59%
AUM $169 Million
COMPETING FUNDS XLE, IXC
4 ETF.com/ETF Report
PROFILE
At his firm, CMG, Stephen Blumenthal employs a disciplined, tactical approach despite what his guy may be telling him
By Cinthia Murphy
TACTICALLY PURSUING PRICE MOMENTUM has been something Stephen Blumenthal has done for a long time. Since his days as an institutional—and later retail—advisor for Merrill Lynch in the late 1980s and early 1990s, Blumenthal has believed that honing in on
the supply/demand dynamics of price momentum, and following the leaders, was the way to navigate an ever-changing market.
He eventually built an asset management business in Philadelphia—CMG—that took that philosophy and built disciplined portfolios around it. The originally
all-mutual-fund shop today relies heavily on ETFs—and only on the most liquid and tradable ones—to effectively and tactically adjust exposures in order to own the winners and mitigate downside risk. What’s unique about CMG’s approach is its unwavering focus on discipline, even when that means ignoring your own fundamental views on the market.
Tactical HuntPrice Momentum
FIRM Capital Management Group (CMG)
FOUNDED 1992
LOCATION Philadelphia
AUM $600 Million
ALL ETFs? No
Advisor Quick View
for
Phot
o by
Cap
ital
Man
agem
ent
Gro
up
You’re more of a tactical shop. What kind of portfolios are you building? We run several portfolios, and they’re all a little bit different, but the similarities are that they are based off of price momentum in some form. In a way, tactical strategies seek to move toward lead-ership and identify leadership through price—it’s all in the mechanics of supply and demand.
What we do is tactically trade. We have a high-yield-trend-following strategy that dates back to 1992. We’ve been doing it for a long time. It’s simply looking to be in line with where a trend is. If the trend is moving higher, we take exposure to a high-yield ETF. And if the trend is moving lower, we shorten the exposure and we invest in short-term Treasury bills ETFs, such as the SPDR Barclays 1-3 Month T-Bill (BIL|A-62).
You are not an all-ETF shop. When did you begin adopting ETFs? We were originally a mutual fund shop because you didn’t have ETFs. But over the last five years, we’ve largely moved to ETF types of strategies and will continue to migrate completely over to ETF strategies.
Stephen Blumenthal’s firm, Capital Management Group, continues to migrate assets into ETFs
NOVEMBER 2014 5
What is the main appeal of ETFs to you? Tax efficiency? Low cost? Have they allowed you access in any way different than mutual funds did?There is actually a beneficial handful of things about ETFs, such as tax efficiency, transparency, lower fees. The other reason is liquidity.
The world of ETFs has grown so large, with many diverse players, that the liquidity in most of the instruments we’re interested in trading is so fluid that we can execute in a very effective way. Trading ETFs across multiple platforms like Envestnet or Placemark enables us to get mass distribution of our ETF tactical strategies.
Have you encountered any challenges with implementing ETF strategies?There are definitely bumps along the way, and they’re important bumps as the industry in gen-eral continues to evolve. I would say that one of the bigger challenges is consistent execution.
When you execute your strategy—as an ETF strategist—on a platform like Envestnet or Place-mark, you upload and deliver the trade, and all you see is one large pool of assets you’re managing. Those platform providers then disseminate those trades to the advisors that have accounts at Schwab and at TD Ameritrade, Fidelity and Pershing.
At that point, there’s an execution question as to how those desks at Schwab are handling the execution versus the desks at, say, TD Ameritrade, and versus us trading directly in some other loca-tions using an agency trader like WEX (Wolverine Exchange). What we’re seeing is that the old bro-kerage model of ticket charge and transaction fee and controlling the order flow is changing. The independent custodians are finding other ways to be profitable. The same fee compression that’s occurred in the ETF is happening on the execu-tion side as well.
To put it another way, the bumps along the way are ensuring best execution and making sure that we’re delivering a consistent experience at these different places through a platform pro-vider as we are trading directly.
Given the current market environment, how are you protecting for downside risk? How are you adjusting the exposure of your various portfolios?We run roughly five different portfolios. Let me give you an example of one of them—core fixed income. It’s a topic that’s on every advisor’s mind right now. With rates so low, many are asking, “What do I do?” Outside of stepping globally to emerging market bonds with little understanding of that market, a lot of investors are stretching into the high-yield space to capture yield not knowing the risks they’re taking. I believe high-yield bonds are at the doorstep of a material default wave.
We are at the core a tactical shop. One of our strategies is what we call a core fixed-income strategy. The strategy analyzes the relative price strength of seven fixed-income categories: infla-
tion-protected, U.S. Treasurys, investment-grade corporates, Treasury bills, high-yield bonds, international sovereign bonds and emerging market bonds. The objective is to be invested in the fixed-income ETFs showing the strongest market leadership.
On a weekly basis, we’re taking a look at the relative strength of these various assets over a recent period of time. We’re essentially looking backward and saying, “Of these things, against each other, which core bond investments are showing the strongest relative price performance? Where is leadership moving to?” We invest in the top two or three out of those seven using ETFs.
For example, at the end of April, we were long U.S. Treasurys (iShares 20+ Year Treasury Bond (TLT|A-85)) and emerging market debt (PowerShares Emerging Markets Sovereign Debt (PCY|B-50)). Over the last two months, we’ve
THE OLD BROKERAGE MODEL OF TICKET CHARGE AND TRANSACTION
FEE AND CONTROLLING THE ORDER FLOW IS CHANGING
6 ETF.com/ETF Report
PROFILE
//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
seen a significant reduction in exposure to U.S. Treasurys (TLT) and the strategy is now overweight Treasury bills (SPDR Barclays 1-3 Month T-Bill (BIL|A-62)). Recent exposure to an international sovereign bond ETF (SPDR Bar-clays International Treasury Bond (BWX|B-27) was reduced, and high yield has been showing relative price weakness compared to the other options much of the year.
In the end, we seek to manage risk by hav-ing the flexibility to move the fixed-income ETFs that are the strongest-performing asset. Some-times short-term Treasury exposure may be the best place to be.
Consider how all of these market experts got it wrong on the Treasury market this year. Back in December, they all called the 10-year Treasury yield to be somewhere between 2.9 and 3.4% by the end of the year. Instead, we recently hit a low of 2.4%.
Is the message here that you can’t allocate based on your fundamental view? The point is that my view was the same as their view coming into 2014. Yet that view was wrong, and our bond strategies remained correctly posi-tioned in long bonds the entire time. Had I gone with more of a fundamental view and shortened our portfolio, I’d have missed badly, and I’d be
On the equity side, how are you positioned? Are you worried about overvaluation? I have a fundamental view that the market is richly priced. It’s over-bought and it’s over-believed, except that the Fed is still very supportive, and the trend is positive. Looking at those factors, I’d have to say that the general trend is still higher, and from a trading perspective, our tactical equity strategies are positioned mostly long equities.
My personal view is that market risk is high, while forward returns look low from all kinds of historical valuation measures. Which event triggers the next event: the Fed, recession, a credit event, a geopolitical event or a cyber attack? From what level and when? It could be within a time frame that I might guess—and I mean guess—would be a year from now, or it might be a couple of years from now; I don’t know. We would rather let the technicals of the market—such as where the relative strength is—tell us.
MY PERSONAL VIEW IS THAT MARKET RISK IS HIGH,WHILE FORWARD RETURNS LOOK LOW FROM ALL KINDS OF HISTORICAL VALUATION MEASURES
left wondering, “When do I get back in? Should I lengthen my bond duration?” We won’t always be right—no one is—but our goal is to be right a high percentage of the time that follows a pro-cess based on what price behavior is telling us about market leadership.
We’re in an environment where rates are so incredibly low that risk is much more elevated. No investment manager or advisor alive has seen this before. We believe it is important to have a disciplined process that can manage both expo-sure and duration risk.
How many ETFs do you use? a geopoliticalFor us, it’s important to have liquidity and trad-ability, so that factors into the decision to pick one ETF or another. We use seven ETFs in our core fixed income. We use six in our global asset allo-cation. We use somewhere between 90 and 100 in our opportunistic all-asset portfolio, and we use two in the high-yield strategy.
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8 ETF.com/ETF Report
The price of oil goes up, oil stocks go up; the price of oil goes down, oil stocks go down. Journalists often cite this basic equation when explaining why energy equities are moving the way they are. But that’s much too simplistic, and can be flat wrong, for that matter.
Take a look at the latest numbers. By any measure, it’s been a pretty lousy year for oil. Both of the major crude oil benchmarks are down year-to-date: European Brent has fallen 15%, while U.S. West Texas Intermediate (WTI) has lost 8.1%.
In such an environment, one might expect oil stocks to be down. Yet they’re actually up.
As of this writing, the Energy Select Sector SPDR Fund (XLE|A-97) is up less than 1% this year, while another popular energy fund, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO|A-71), is up more than 3%. Both funds hit all-time highs earlier this summer (see Figure 1).
ETFs FOR THE NEW
U.S.ENERGY
BOOMWHY THE FORTUNES OF OIL COMPANIES ARE NO LONGER TIED EXCLUSIVELY TO THE PRICE OF OIL
8 ETF.com/ETF Report
By Sumit Roy
9NOVEMBER 2014
US PRODUCTION SURGESTo understand this divergence between the commodity and the stocks, it’s important to understand why oil prices are falling in the first place: the U.S. oil boom. While there are a lot of factors that go into shap-ing the price of oil, surging crude oil pro-duction in the United States has been the biggest weight in recent years.
According to the Energy Information Administration, output in the country is up a whopping 1.1 million barrels per day from a year ago to last stand at more than 8.8 million barrels per day thanks to tech-nological advances that have enabled pro-ducers to tap into previously uneconomic or inaccessible oil reserves (see Figure 2).
The U.S. production gains are com-ing largely from three areas: the Bakken Shale in North Dakota; the Eagle Ford Shale in Texas; and the Permian Basin, also in Texas.
Indeed, North Dakota and Texas now account for half of total U.S. oil output, according to the EIA, up from a quarter only four years ago. Overall U.S. output is at the highest level since 1986 and puts the U.S. on track to potentially become
the world’s largest crude oil producer sometime in 2015, surpassing Saudi Ara-bia and Russia.
In the context of relatively tepid de-mand growth, the U.S. has single-handedly kept oil prices in check. But surging pro-duction is not bad news for all oil compa-nies. In fact, it’s great news for domestic
producers with large positions in the shale oil plays that are driving the boom.
Some of these companies have man-aged to grow their production levels at double-digit rates, year after year, with the promise of more growth to come. That’s bolstered their profits, even as oil prices have drifted lower.
ETFs TO CONSIDERMost of those firms have some weight in the largest energy exchange-traded fund, XLE. But the market-cap-weighted fund is top heavy, with international oil majors such as Exxon Mobil and Chevron making up a huge part of the ETF.
“Investors who are looking to maxi-mize their exposure to the U.S. oil boom should focus on smaller exploration and production [E&P] companies with high- production growth profiles,” explained Fadel Gheit, managing director and senior analyst covering the oil and gas sector for New York-based Oppenheimer & Co. “The oil majors are too big to grow production, and any growth, even under the most opti-
XLE VS. OIL PRICES FIGURE 1
JAN FEB MAR APR MAY JUN JUL AUG SEP2014
US CRUDE OIL PRODUCTION FIGURE 2
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
15
10
5
0
-5
-10
-15
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
% RETURN
THOUSAND BARRELS PER DAY
U.S. crude oil production has
surged in the past few years
Oil prices may be down
significantly, but energy ETFs are still
showing positive returns
VUG
WTI
XLE
BRENT
Source: Bloomberg, year-to-date data as of 9/30/2014.
Source: Energy Information Administration, data as of 9/26/2014
10 ETF.com/ETF Report
© 2014 by S&P Dow Jones Indices LLC, a part of McGraw Hill Financial. All rights reserved. S&P® and Indexology® and Indexology® ® are registered trademarks ® are registered trademarks ®
of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to ® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to ®
invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. This is not an offer of services in any jurisdiction where S&P Dow Jones Indices does not have the necessary licenses.
®
Income, take your pickThere’s more to income than bonds. You know it — but where do you fi nd it? S&P Dow Jones Indices is a leading source of uncommon investing ideas — from the highest yield to highest quality indices. Come to Indexology for new income options — from dividends to preferred stock, from corporates to muni bond indices.
Where income choice is abundantspdji.com/indexology/income
mistic scenario, would be at a much lower rate than the small E&Ps.”
An alternative for ETF investors is IEO, which doesn’t hold any position in the two oil behemoths and has handily out-performed XLE this year. IEO holds rela-tively large positions in E&Ps such as EOG Resources, Pioneer Natural Resources and Continental Resources, among others, which are some of the biggest players in the U.S. oil boom.
Another option is the Market Vectors Unconventional Oil & Gas ETF (FRAK|B-28), which, as the name says, holds firms with exposure to the unconventional oil and gas segment.
Both IEO and FRAK have compara-ble expense ratios, at 0.45% and 0.54%, respectively (see Figure 3).
One thing to keep in mind with these ETFs is that they hold oil and natural gas companies, and in some cases, refiners and infrastructure companies as well.
The big firms mentioned earlier, Exx-on and Chevron, are integrated oil com-panies with a foothold in the entire pe-troleum supply chain, from production to refining to distribution. While that’s not necessarily a bad thing, by limiting expo-sure to such firms, one can get more con-centrated, but still diversified exposure to the U.S. oil boom.
OTHER ENERGY PLAYSOne area to watch out for in particular is natural gas. The natural gas market is distinct from the oil market, and prices for the fuel have performed quite poorly in recent years. Unsurprisingly, produc-ers with a heavier tilt toward gas have underperformed, and that’s why an ETF such as the First Trust ISE-Revere Natural Gas ETF (FCG|A-99) has underperformed, with a year-to-date loss of 11.3%.
If someday natural gas prices rebound—and there’s a case to be made that they will—FCG may be a good bet for the long term. However, the point is that not all energy ETFs are created equal, and it’s important to buy the ETF that pro-vides the exposure that you want.
Up until now, the ETFs mentioned have focused on energy producers. But another way to invest in the sector is through oil service companies.
The Market Vectors Oil Services ETF (OIH|A-52) holds the companies that pro-vide the “picks and shovels,” including the drilling rigs required to get the fossil fuels out of the ground (see Figure 4).
While oil service companies don’t get their earnings directly from the sale of oil and gas, their profits are very closely tied to commodity prices.
Service companies tend to do better late in the commodity cycle, when labor and equipment are in short supply, giv-ing the firms tremendous pricing power. On the flip side, service companies are hit particularly hard during commodity busts and they don’t perform as well during the early stages of a price recovery.
THE BOTTOM LINEInvestors have plenty of options when it comes to investing in the energy sector, but IEO and FRAK stand out as offering the best exposure to the U.S. oil boom.
IEO & FRAK YTD PERFORMANCE FIGURE 3
JAN FEB MAR APR MAY JUN JUL AUG SEP2014
FCG & OIH YTD PERFORMANCE FIGURE 4
JAN FEB MAR APR MAY JUN JUL AUG SEP2014
25
20
15
10
5
0
-5
-10
25
20
15
10
5
0
-5
-10
-15
%
%
RETURN
RETURN
IEO and FRAK
provide more direct exposure to the U.S. oil
boom
Natural gas and oil services
ETFs can be used to customize energy sector exposure
VUG
VUG
IEO
OIH
FCG
Source: Bloomberg, year-to-date data as of 9/30/2014.
Source: Bloomberg, year-to-date data as of 9/30/2014.
FRAK
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© 2014 by S&P Dow Jones Indices LLC, a part of McGraw Hill Financial. All rights reserved. S&P® and Indexology® and Indexology® ® are registered trademarks ® are registered trademarks ®
of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to ® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to ®
invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. This is not an offer of services in any jurisdiction where S&P Dow Jones Indices does not have the necessary licenses.
®
Income, take your pickThere’s more to income than bonds. You know it — but where do you fi nd it? S&P Dow Jones Indices is a leading source of uncommon investing ideas — from the highest yield to highest quality indices. Come to Indexology for new income options — from dividends to preferred stock, from corporates to muni bond indices.
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12 ETF.com/ETF Report
The
PERFORMING COMMODITY ETFs
&
Most investors look at commodity ETFs as a good source of portfolio diversification. In 2014, they’ve been, indeed, great diversifiers thanks to dropping correla-tions between commodity and other asset classes such as stocks and bonds.
But, truth be told, there’s no one easy way to look at commodity ETFs. To quote ETF.com’s Chief Investment Officer Dave Nadig: “While rational people argue about how to make an equity index, it’s fairly easy to agree on a few basic principles like ‘what is a large-cap stock?’ or even more fundamentally, ‘what’s a stock?’” he said in a recent blog. “In commodities, there’s no such common ground.”
If indexing such a diverse segment is challenging, picking the winners can prove practically impossible. This year is a perfect example of just how commodity markets—and the ETFs that track them—can deliver surprising performances because the ever-changing bal-ance between supply and demand is, well, ever-changing.
Consider that coming into 2014, people like S&P Dow Jones Global Head of Commodities Jodie Gunzberg had predicted commodities would outshine equities thanks to tight supplies and a pressing timeline for higher interest rates and inflation. Instead, most commodity markets have plummeted year-to-date, and some to multiyear lows.
By Cinthia Murphy
BEST-WORST-
10 WORST-PERFORMING COMMODITY ETFs FIGURE 1
TICKER FUND ETF.com REPORT TITLE 1-YR TRR
WEAT Teucrium Wheat Commodities: Agriculture Wheat -26.58
CORN Teucrium Corn Commodities: Agriculture Corn -25.51
GRU Elements MLCX Grains - Total Return ETN Commodities: Agriculture Grains -23.92
SGG iPath Dow Jones-UBS Sugar Total Return ETN Commodities: Agriculture Sugar -23.88
JJG iPath Dow Jones UBS Grains Total Return ETN Commodities: Agriculture Grains -23.81
BAL iPath Dow Jones-UBS Cotton Total Return ETN Commodities: Agriculture Cotton -23.09
WEET iPath Pure Beta Grains ETN Commodities: Agriculture Grains -18.91
CTNN iPath Pure Beta Cotton ETN Commodities: Agriculture Cotton -18.60
SOYB Teucrium Soybeans Commodities: Agriculture Soybeans -16.11
UAG Etracs CMCI Agriculture Total Return ETN Commodities: Agriculture -16.02
Sources: ETF.com, Bloomberg. Data as of 9/30/2014.
Selecting a broad-based commodity ETF is not as simple as in equities since they differ so greatly
13NOVEMBER 2014
HUGE RETURN DISPERSIONSWhat’s also evident is that the disparity in returns between the single-best-performing commodity ETF and the worst-performing was a whopping 95.89 percentage points in the first three quarters of the year. That’s no chump change.
If you picked the coffee market, and bought into the iPath Dow Jones-UBS Coffee Total Return ETN (JO|B-67) at the beginning of the year, you captured a 69.31 percent gain in nine months.
But if you bought into the wheat market through a fund like the Teucrium Wheat ETF (WEAT|F-100), the abundant rains in the U.S. Midwest that have resulted in bumper grain harvests cost you about a 26.58% loss in that same period.
We are talking about an asset class that comprises very different individual markets that move on totally different fundamentals.
“This is a very interesting time for commodi-ties,” Gunzberg told us. “Post-financial crisis, suppli-ers stopped supplying, and inventory shortages were driving commodities returns, but what happened this year is that shortages weren’t severe enough to push markets higher.”
TURNING POINTIn her view, supply and demand for many of these mar-kets are hovering near “equilibrium,” something that only happens around “turning points.” That implies the commodity segment could be about to turn around … or not. It also clearly suggests that finding the winners may be a fool’s errand.
“We’re in a mean-reverting environment, where it’s very difficult to pick winners,” Gunzberg said.
So what did well so far in 2014, and what has deliv-ered heartache?
The 10 worst-performing commodity ETFs in the first nine months of the year were all linked to agricul-ture (Figure 1).
They each are focused strategies, tapping either into a specific market or into the grains segment. Note that only the Etracs CMCI Agriculture Total Return ETN (UAG|C) is a somewhat broader-market agriculture fund. UAG invests in 10 different commodity markets.
WE’RE IN A MEAN-REVERTING ENVIRONMENT, WHERE IT’S VERY
DIFFICULT TO PICK WINNERS
But they all shared a similar tale of benign grow-ing-season weather that spelled out abundance at a time when global demand is uncertain, particularly in growth-challenged emerging economies.
These losses have come as the broader stock mar-ket, as measured by the SPDR S&P 500 ETF (SPY|A-98), eked out gains of 6.5% in the same period. And there are a growing number of economists and analysts sug-gesting that commodities are actually in a down cycle, and we have yet to see the extent of that weakness.
TOP PERFORMERSOn the flip side, seven out of the top 10 best-perform-ing commodity ETFs are also linked to agriculture, but instead of grains, cotton and sugar, the standout mar-kets were coffee, cocoa and livestock (Figure 2).
The two coffee-linked exchange-traded products in the market today—the iPath Dow Jones-UBS Coffee Total Return ETN (JO|B-67) and the iPath Pure Beta Cof-fee ETN (CAFE|B-98)—ranked Nos. 1 and 2 in the first three quarters of the year, delivering gains of 69.31 and 63.78%, respectively.
Behind that impressive performance was a drought so devastating in Brazil at the beginning of the season
10 BEST-PERFORMING COMMODITY ETFs FIGURE 2
TICKER FUND ETF.com’s REPORT TITLE 1-YR TRR
JO iPath Dow Jones-UBS Coffee Total Return ETN Commodities: Agriculture Coffee 69.31
CAFE iPath Pure Beta Coffee ETN Commodities: Agriculture Coffee 63.78
UBC ETRACS CMCI Livestock Total Return ETN Commodities: Agriculture Livestock 26.79
LSTK iPath Pure Beta Livestock ETN Commodities: Agriculture Livestock 26.25
DPU PowerShares DB Commodity Long ETN Commodities: Broad Market 22.57
NIB iPath Dow Jones-UBS Cocoa Total Return ETN Commodities: Agriculture Cocoa 21.93
BDG PowerShares DB Base Metals Long ETN Commodities: Industrial Metals 20.19
CHOC iPath Pure Beta Cocoa ETN Commodities: Agriculture Cocoa 19.81
COW iPath Dow Jones-UBS Livestock Total Return ETN Commodities: Agriculture Livestock 18.20
GRN iPath Global Carbon ETN Commodities: Energy Carbon Credits 17.36
Sources: ETF.com, Bloomberg. Data as of 9/30/2014.
14 ETF.com/ETF Report
that the price of Arabica coffee jumped nearly 90% year-to-date. The world’s largest coffee producer is projecting next year’s crop will also be hurt, at a time when other growers in Central America and Mexico are battling crop diseases.
Tightening coffee supplies pushes prices higher, and boosts ETPs that invest in this market.
THE BROAD-MARKET APPROACH Outside of honing in on specific commodity markets, many investors often opt instead for broad-market strat-egies that serve up exposure to a little bit of everything in the commodity space.
These strategies—none bigger than the $5 billion PowerShares DB Commodity Tracking ETF (DBC|B-86)—have had a somewhat lackluster, albeit mixed, trajec-tory this year.
DBC, a fund that tracks an index of 14 commodities and invests in futures contracts, slid 9.5% in the first three quarters of the year. That decline has come largely due to its heavy allocation to energy, a segment that rep-resents more than 50% of the overall portfolio.
Energy markets, particularly oil, have struggled to find much upside in the face of surging U.S. production that is on pace to be the world’s largest in 2015, top-ping Russia and Saudi Arabia. Consumption is also less
than certain, with global economies facing growth chal-lenges—factors that are weighing on oil, and dragging down DBC’s performance.
Another big broad-market strategy in the space is the $1.5 billion iPath Dow Jones-UBS Commodity Total Return ETN (DJP|B). DJP sets out to diversify its basket of commodities by applying a 33% cap to each commod-ity sector and a 15% cap to each individual commodity. That methodology minimizes the portfolio’s exposure to energy, and allows for more access to other markets such as gold and aluminum.
That distinction has allowed it to stave off some of the energy-linked losses DBC has faced year-to-date. The fund gave up 6.5% in the first three quarters of 2014.
As a final note, consider the PowerShares DB Agri-culture ETF (DBA|C-7). The performance of the $1.2 bil-lion agriculture fund in a way epitomizes the impact of diversification, even within a commodity segment.
Remember that agriculture funds topped the list of best-performing strategies in the first three quarters of the year, as well as lined the bottom of the well. They are the source of that massive 95-percentage-point-plus disparity in performance in the commodity segment.
So far this year, DBA, which invests in 10 different agricultural commodities through futures contracts, has delivered modest gains of 5.4%.
That’s nothing to write home about, necessarily. But it’s certainly a good example of what blending the winners such as coffee and livestock, with this year’s losers, namely sugar and corn, can do. DBA can deliver broad-based diversification and a performance that somehow irons it all out, and meets investors some-where in the middle.
DIVERSIFIED COMMODITY STRATEGIES HAVE HAD A SOMEWHAT LACKLUSTER TRAJECTORY THIS YEAR
DBA, DJP & DBC YTD PERFORMANCE FIGURE 3
J F M A M J J A S2014
Source: Bloomberg, year-to-date performance as of 9/30/2014.
25
20
15
10
5
0
-5
-10
-15
% RETURN
DBA
DJP
DBC
Diversified commodity ETFs have exhibited mixed performance year-to-date
Vanguard Total Stock Market ETFBuilding a solid foundation means having the right pieces in place.
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All investing is subject to risk, including the possible loss of the money you invest.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor will incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
For more information about Vanguard ETF Shares, visit advisors.vanguard.com/VTI, call 800 684-8553, or contact your broker to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Source: Morningstar as of 03/03/2014. Based on 2014 industry average expense ratio for total stock market ETFs of 0.22% and Vanguard VTI expense ratio of 0.05%.
© 2014 The Vanguard Group, Inc. All rights reserved. U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623. Vanguard Marketing Corporation, Distributor.
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Vanguard Total Stock Market ETFBuilding a solid foundation means having the right pieces in place.
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Helping your clients meet their goals starts with an approach rooted in long-term planning. VTI can help build a solid foundation for your clients’ portfolios by exposing them to over 3,000 stocks. And with one of the lowest expense ratios in its category, Vanguard Total Stock Market ETF is one more low-cost option from the industry’s low-cost leader.*
Build a stronger foundation for your clients at advisors.vanguard.com/VTI today.800 684-8553
Are you Vanguarding® your clients’ portfolios?
Follow us @Vanguard_FA for important insights, news, and education.
All investing is subject to risk, including the possible loss of the money you invest.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor will incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
For more information about Vanguard ETF Shares, visit advisors.vanguard.com/VTI, call 800 684-8553, or contact your broker to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Source: Morningstar as of 03/03/2014. Based on 2014 industry average expense ratio for total stock market ETFs of 0.22% and Vanguard VTI expense ratio of 0.05%.
© 2014 The Vanguard Group, Inc. All rights reserved. U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623. Vanguard Marketing Corporation, Distributor.
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16 ETF.com/ETF Report
WHAT’S THE MARKET CAP OF WHEAT?What exactly is a commodity anyway? It’s something that’s traded and that’s fungi-ble; that is, my block of snow is just like your block of snow, so we can agree on how to define it—a cube 1 meter wide that weighs so much.
So how do you determine whether one commodity is more important than another, and what its precise weight should be in any kind of portfolio? How a given index answers this question is actually the single biggest determinant of your returns as an investor (see Figure 1).
The simplest, most naive way to make a commodity index is simply to weight based on production. That’s the way the S&P GSCI (Goldman Sachs Commodity Index) views the world, just selecting the front-month futures contract based on how much of the thing is produced. Each major index has its own take, most picking from a fixed list of securities and weighting based on produc-tion, consumption or an arbitrary system like equal weighting.
The end result is radically different exposures to the key commodity sectors (see Figure 2).
Indexes like DBLCI and GSCI will have their fates determined almost exclusively by how energy performs. The CCI, by contrast, will be tossed around by corn and soybeans. These differences matter,
Tackle is a small-cap company. We might split a few hairs about how to get there, but we’ll generally end up agreeing that Boeing is a U.S. company and Toyota is a Japanese company.
And when it comes to rolling up an index, we’ll probably even agree that there are some “natural” ways to do it. You want to own the entire world equity market? Well, just buy a little bit of every company in the world based on how big they are. Indeed, weighting by mar-ket cap is so commonly accepted as the default that most indexes only bother to tell you that’s the plan when you get into the details.
In commodities, however, things just aren’t so simple.
COMMODITY INDEXING AN
ACTIVE CHOICEVariation among commodity benchmarks can be significant. Choose carefully.
COMMODITY INDEXES COMPARED FIGURE 1
INDEX COMMODITIES INCLUDED WEIGHTING CONTRACT SELECTION
Goldman Sachs Commodity Index Fixed, 24 Production Front Month
Continuous Commodities Index Fixed, 17 Equal Strip
Dow Jones – UBS Fixed, 10 Equal Sector/Liquidity Front Month
Rogers International Commodity Index Committee, Currently 35 Consumption/Committee Front Month
Deutsche Bank Liquid Commodities Index Fixed, 14 Production/Capped Contango Killer
SummerHaven Dynamic Commodities Index Backwardation/Momentum Equal Contango Killer
Source: Index providers
You may think you’re being strategic by allocating to commodities. But the choice of your commodity ETF makes you an active investor, like it or not.
Here’s the dirty little secret about com-modities: Nobody has any idea how to make an index of them. And this can lead to big problems for investors who are treat-ing commodities as an asset class.
Consider how things work in equities. How much of your clients’ money is in large-cap U.S. equities? I don’t actually care what the answer is, but the fact that you can even tell me means we can agree on cer-tain things about the equity market.
We might disagree on where to draw the lines, but we’ll all agree that Microsoft is a large-cap company, and Bob’s Bait &
By Dave Nadig
17NOVEMBER 2014
because the individual commodity sectors are far, far less correlated than, for instance, the different sectors of stocks in the U.S.
With rare exceptions, the market for oil is simply not connected to the market for alumi-num or corn or gold (see Figure 3).
COMMODITIES = TACTICALWhat this means for ETF investors is that any decision you make is inherently an active, tactical call on how the different components of the commodity market will perform. And in fact, the top seven ETFs in broad commodities each represent a unique tactic to consider (see Figure 4).
Unlike most parts of the ETF universe, there’s no “easy button” play here. The Pow-erShares DB Commodity Tracking ETN (DBC|B-86) is the asset leader for good reasons—it’s a traditional weighting, with tons of energy exposure, but the DBLCI methodology means it avoids the worst problems of contango. However, a decision to buy DBC still means a decision to massively weight energy in your commodity exposure. You want to load up on agriculture? You grab the GreenHaven Continu-ous Commodities ETF (GCC|A-3).
Perhaps the most interesting ETFs gain-ing real traction, however, are the United States Commodities Fund (USCI|C-10) and the First Trust Global Tactical Commodity Strategy (FTGC|C-66). Neither fund is purporting to provide asset-class beta exposure. Rather,
SECTOR BREAKDOWN OF MAJOR COMMODITY INDEXES
THE BIG 7 COMMODITY ETFs & ETNs FIGURE 4
TICKER FUND INDEX TRACKED EXPENSE RATIO AUM
DBC PowerShares DB Commodity Tracking DBLCI 0.88% $5 B
DJP iPath Dow Jones-UBS Commodity Total Return ETN DJ-UBS 0.75% $1 B
GSG iShares S&P GSCI Commodity GSCI 0.73% $1 B
USCI United States Commodity SDCI 0.88% $825 M
RJI ELEMENTS Rogers International Commodity - Total Return ETN RICI 0.75% $790 M
GCC GreenHaven Continuous Commodity CCI 1.03% $326 M
FTGC First Trust Global Tactical Commodity Strategy Active 0.95% $270 M
Source: ETF.com, 9/22/2014
COMMODITY SECTOR RETURNS FIGURE 3
2009 2010 2011 2012 2013 2014
Source: Bloomberg, data as of 9/22/2014. Indexes represented are Bloomberg Commodity subindexes.
120
100
80
60
40
20
0
-20
-40
-60
% RETURN
Methodology differences can result in dramatically different commodity exposures
Precious Metals
Livestock
Agriculture
Industrial Metals
Energy
FIGURE 2
DBLCIS&P GSCICCI SDCI RICI
INDUSTRIAL METALS
ENERGY
AGRICULTURE
LIVESTOCK
PRECIOUS METALS
Source: Index providers
DJ-UBS
18 ETF.com/ETF Report
don’t really have a beta in the same sense that we think about an asset class like large-cap equities. The differences here are enormous, and perhaps more than anywhere else in ETFs, you need to have a very conscious opinion about the role of each class of commodities in the global economy before choosing a product.
WATCH THE TAXES!Commodity products come in two flavors: 1933 Act registered commodities pools and exchange-traded notes.
The ETNs—like RJI and DJP—have some small amount of credit risk, but will show up in your taxes with a regular 1099 form, and be considered like a stock for the pur-pose of long- and short-term capital gains.
The commodities pools, like segment leader DBC, will send you a K-1 form at the end of the year, and all gains will be both marked to market (meaning you have to file and pay taxes on gains even if you haven’t sold) and taxed at a blended 60/40, long-term/short-term capital gains rate.
they seek to generate returns by explicitly exploiting the structure of the commod-ity markets, profiting from backwardation and momentum, and in the case of FTGC, active manager insight.
In the fairly flat markets of 2014, this strategy has paid off (see Figure 5).
The story here is simple: with virtually every commodity in contango, simply get-ting out of the way of the worst roll costs is a recipe for outperformance. The rank-ing here—FTGC, USCI and DBC—is in the same order of how aggressively they man-age contango in their methodology.
Over longer periods of time, however, the selection of which commodities to be in, and at what weights, is going to drive your returns even more. Over the past five years, for example, the best-performing ETP is actually the Elements Rogers Inter-national ETN (RJI|B-79), based on an index that does no contango mitigation whatso-ever, and that includes the most diverse collection of commodities. The important thing to remember is that commodities
ETF RETURNS 2014 YTD FIGURE 5
J F M A M J J A S2014
Source: Bloomberg, as of 9/22/2014
20
15
10
5
0
-5
-10
%
RETURN
5-YEAR ETF RETURNS FIGURE 6
2009 2010 2011 2012 2013 2014
Source: Bloomberg, as of 9/22/2014
60
40
20
10
0
-20
% RETURN
DBC DJP GSG GCC USCI RJI
WTI Crude
Brent Crude
Gas Oil
RBOB Gasoline
Heating Oil
Corn
Natural Gas
Live Cattle
Soybeans
LME Copper
Wheat
Lean Hogs
Gold
LME Aluminium
Sugar #11
Cotton No. 2
Coffee 'C'
KCB Wheat
Feeder Cattle
LME Nickel
LME Zinc
LME Lead
Silver
Cocoa
ICE Natural Gas
Copper
LIF White Sugar
Soybean Oil
Platinum
Soybean Meal
LIF Cocoa
LME Tin
Lumber
Milk Class III
Oats
Orange Juice
Palladium
Rough Rice
Rubber
WCE Canola
You think commodities are just about gold, oil and corn? Think again. This table shows what the big ETFs held on Sept. 22, 2014.
GOT MILK?
FTGC
USCI
GCC
RJI
DJP
DBC
RJI
GCC
GSG
GSG
DBC
DJP
18 ETF.com/ETF Report
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14
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iShares has $710 billion in assets under management* in its U.S.-listed
ETFs tracking fixed-income markets. Matthew Tucker is the head of
iShares’ Fixed Income Strategy team. Here he discusses how ETFs have
provided investors of all kinds with access and exposure to the fixed-
income asset class.
How have investor attitudes toward fixed income changed in the years since the 2008-09 financial crisis? Has it fallen out of favor?I think one of the impacts of the financial crisis was to re-empha-
size the importance of fixed income. A lot of investors think of fixed
income as being the risk balancer in their portfolio, the ballast against
riskier investments like equities. And if you look at performance in
2008, what you saw was that core fixed income—especially high-
quality sectors like Treasurys—were up, and almost everything else
was down.
I think that’s helped to reinforce belief in the diversifying benefit
of fixed income. Obviously, in the years since then, we’ve been in an
environment where yields have been very low and going lower. The
challenge has been not so much, “Do I want to own fixed income?”
but, “Where can I go in the fixed-income market to generate yield?
And how can I continue to think of fixed income as an income-
generating asset?” That is becoming increasingly difficult given the
low-rate environment.
Where are investors looking for income in the current mar-ket environment?We’ve seen a couple of interesting trends this year. Earlier in the
year, emerging markets was an asset class that was a bit out of favor.
We’ve seen a lot of interest come back in, a lot of money come back
into the asset class, really through Q2 and Q3. The iShares J.P. Mor-
gan USD Emerging Markets Bond ETF (EMB) has taken in about
$900 million year-to-date. There have been some periods of inflows
and outflows, but overall, emerging market fixed income has been a
place that investors have really moved into.
We can contrast that with high yield, which people think about
traditionally as being another income source in the fixed-income
market. It’s gone through periods where it’s had a lot of money come
in, and also when a lot of money has come out.
Interestingly, we have tended to see inflows return when high
yield sells off, as investors are drawn in the by the lower prices and
higher yields. For much of September, we saw price weakness in the
asset class, and then during the week of September 29 to October 5,
we had over $750 million come into the iShares iBoxx $ High Yield
Corporate Bond ETF (HYG). That is the most we’ve ever seen come
into the fund in a single week. So although money has come out of the
sector in aggregate, along the way, we’ve seen some pretty big flows
both in and out over the year.
How can investors protect their portfolio from rising rates?I think the most important thing investors have to think about is inter-
est rates and rising rates, and what that really means. People often
think it is a very simplistic model, where once the Fed starts raising
rates, that’s going to be when all interest rates go up. The reality is
that, if you look at interest rates for securities of different maturities,
you find that they have very different drivers.
Shorter-maturity securities are driven largely by what the Fed
does. When the Fed reaches a point where they believe that either
the economy is growing sufficiently that they can take away some of
the accommodation, or they believe that inflation is starting to rise
at a dangerous rate, they’re likely to increase the federal funds rate.
Right now, the market believes that the Fed will begin to do this at
some point in the middle of 2015, around June or July.
Now, what’s interesting is that when the Fed takes this action,
we will see an increase in short-term rates. Likely, three-month rates
will go up, as will most rates inside three years. Those are the rates
that are most directly tied to the federal funds rate and the actions
the Fed takes.
A lot of investors invest in the longer-maturity securities, and
things like a 10-year rate or a 30-year rate are not driven nearly as
Thinking About Fixed IncomeA Q&A With Matthew Tucker
Matthew Tucker Head of iShares’
Fixed Income Strategy
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much by the Fed’s immediate actions. Those longer rates are driven
much more by long-term expectations of growth and inflation.
Are ETFs a good vehicle for accessing fixed-income markets? What types of investors are using them? ETFs have become a very viable vehicle for accessing fixed-income
markets, for pretty much every investor.
If I as an individual want to go out and build a portfolio of individual
bonds, it’s really difficult for me to do that. It’s difficult for me to actu-
ally find securities to buy. The transaction costs I’m going to face are
going to generally be very high. And later it may be very hard to sell
a security if I want to. My access to liquidity is limited and the costs I
face are significant.
That’s a challenge that a lot of investors have had historically with
building bond ladders, and with buying individual securities. For this
reason, a lot of investors have simply gone into mutual funds or other
collective vehicles, because then they don’t have to worry about buy-
ing individual securities.
What is interesting to me is that this is a very different behav-
ior than most people exhibit in their equity portfolio. The average
individual will freely go and buy individual equities alongside mutual
funds. But in fixed income, people have largely shied away from
individual securities and moved toward funds, because they have
these challenges with accessing liquidity and inventory.
Fixed-income ETFs are now allowing every investor to buy into
the fixed-income market more directly. If I as an investor want to go
and buy, say, high-yield bonds, I can buy an ETF like HYG. I can get
access to a thousand different securities, a level of diversification
that’s almost impossible to achieve through individual bonds. I can
actually observe market liquidity, as I can see how many shares of
HYG are trading and at what price I can buy or sell. And ETFs tend
to trade with a very low bid/offer spread, so I can very efficiently buy
into the market without paying a lot of transaction costs.
ETFs have the potential to completely change fixed-income
investing for most investors. And we’re really just in the early days
of fully appreciating what this means. Now investors have much
more visibility into and control over their bond portfolio, and they
can access specific markets or customize their holdings according to
what they need as an individual.
And this transformation in the ability of investors to efficiently
access the bond market isn’t limited to just individuals, it impacts
even the largest institutional investors. Historically, a lot of more tradi-
tional institutional fixed-income investors would buy individual bonds
because they had the expertise, the trading desks and access to that
market. And they would also use a collection of different derivative
securities, like swaps or futures, to manage risk and to help comple-
ment their individual bond positions.
The ETF market has gotten large enough, and the securities have
become liquid enough, that they’re now being used by these same
professional fixed-income investors. A fixed-income money manager
might have an individual bond portfolio. They might buy some indi-
vidual securities where they are able to select specific credits, but
they may then complement that portfolio with an ETF, because it
provides diversification and more efficient access to that market. The
key is that the ETF is not a replacement for their individual security
selection; rather, it’s a complement that helps them better manage
risk and liquidity.
Or an institutional asset manager may want to go into a market
where they don’t have as much expertise; like, say, local emerging
market debt. The manager can now simply buy an ETF that accesses
that market, and efficiently get exposure to local emerging market
debt. This is much more efficient than trying to buy individual local-
market emerging market bonds.
Would you talk a little bit more about liquidity in the bond market?The financial crisis was, in a lot of ways, a bank and brokerage crisis.
Basically, financial institutions were faced with incredible stress. As
a result of the financial crisis, a lot of them have had increasing levels
of regulation applied to them. And the end result is that these broker-
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dealers, which used to be at the center of fixed-income liquidity, just
aren’t able to provide as much liquidity as they used to.
The fixed-income market is an over-the-counter market, so if I
want to buy a bond, I need to find someone who’s willing to sell it to
me. There’s no exchange to do that, so I go to a broker-dealer. And
that broker-dealer historically would have bonds already available.
I’d say, “I want to buy a security.” And they’d say, “Great; we’ve got
20 here.” We’d talk about identifying the right one for me, negotiate
price and I could purchase it.
Now we’re in a market where, if I want to buy a bond, I go to
that dealer and they may not have what I’m looking for. Today that
dealer can’t commit the same capital they previously did to buying
and warehousing those securities. Instead, that dealer will say, “I can
help you get that bond. And I will go work with some other clients of
mine to help find it, and then deliver it to you.”
We are moving from the traditional model, which is a dealer-prin-
cipal model, where the actual dealer was taking the risk and owning
the securities and acting as principal, to now more of a brokerage-
agency model, where the broker sits in the middle and just helps
facilitate the transaction—they don’t have to actually warehouse the
securities or take that risk. That’s a tremendous shift in liquidity in the
fixed-income market, and I think it’s actually helping to drive a lot of
the interest in usage of fixed-income ETFs. ETFs provide a new way
for investors to access the fixed-income market via the exchange.
Where has iShares seen the greatest inflows or the most investor interest in its fixed-income funds? How does that reflect what’s going on in the markets?One of the areas in which we’ve seen the most inflows this year has
been Treasury funds. This has been in very sharp contrast to 2013,
where a lot of investors were concerned about rising rates and they
pulled money out of funds that have more interest-rate sensitivity.
But investors generally have gotten more comfortable with the
fact that, although rates might rise, they’re probably not going to rise
for all parts of the curve. As a result, we see investors using ETFs as a
tactical or positioning tool. If an investor wants to, say, position for a
rise in short-term interest rates, they can sell a short-maturity Trea-
sury ETF and buy a longer-maturity fund. Previously, this was some-
thing you would see typically with individual bonds; I think you’re
seeing it more and more with ETFs as people realize that the ETF has
become a very efficient vehicle for accessing fixed income and man-
aging portfolio risk.
We’ve seen inflows across short-dated Treasury ETFs like the iShares
1-3 Year Treasury Bond ETF (SHY), intermediate funds like the iShares
7-10 Year Treasury Bond ETF (IEF), and even our long-maturing Treasury
fund, the iShares 20+ Year Treasury Bond ETF (TLT). Those are actually
our three largest asset gatherers on the Treasury side, which is interest-
ing: It shows that different investors have different views on interest rates
and they are all able to use ETFs to express them.
We’ve also seen the return of interest in core index fixed income
via the iShares Core U.S. Aggregate Bond ETF (AGG). In prior years,
there was some discussion about whether investors still wanted to
use the Barclays Aggregate for the core of their portfolio, and this
year we’ve seen money strongly coming back to that market. AGG
has taken in over $4 billion in 2014 and has now crossed $20 billion
in AUM. I think this reflects a waning concern about potential rising
rates, and a return to investors focusing again on the question of what
role they want fixed income to play in their portfolio. For a lot of inves-
tors, fixed income is about safety, ballast and diversification. An index
core fund like AGG really helps provide that to a portfolio, and that
really comes through in the fund flows.
Target-maturity bond ETFs offer a totally new angle on bond market investing. How are you seeing them used in portfolios? And what has been the investor response?Target-maturity bond ETFs are a concept that we came up with after
talking to a lot of investors, especially those who ladder individual
bonds. We’d point to our bond ETFs, and they’d say, “I understand
they’re diversified. I understand the liquidity benefits. But I really
want to buy a bond, because a bond matures. If I buy a bond, I know I
get a coupon payment every six months. And, at maturity, I get back
my principal payment.”
There’s something very tangible about that known investment
horizon and that return of principal that is really important to a lot
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Today, fixed-income ETFs represent only 0.40 percent of the global fixed-income market. Comparatively, equity ETFs today represent over 3 percent of the global equity market.
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of investors who buy individual bonds, especially those that create
bond ladders. And so in 2010, we introduced what at the time was a
first-of-its-kind product, a target-maturity bond ETF. We decided to
take the things that investors like about an ETF—diversified portfo-
lio exposure that is listed and traded on an exchange—and combine
them with the benefits people like about individual bonds; namely, a
known-investment time horizon and a lump sum payment at the end
of the investment.
We now have a range of funds across investment-grade corpo-
rate and municipal bonds, and about $900 million in assets across
the lineup. I think what’s really resonated with investors is that this
structure helps solve some of the issues around accessing bonds,
specifically building diversification and paying transaction costs.
Those are very real challenges for every investor in the bond market
every day. The iBonds target-maturity funds give investors a pack-
aged solution that helps address some of those issues.
An investor may still buy some individual muni or corporate bonds.
But they can then complement them with these term-maturity iBonds
that provide overall portfolio diversification and allow the investor to
manage their overall bond portfolio in a much more efficient way.
This is something we’re seeing used by individuals and by a lot
of wealth managers who have traditionally built bond ladders, and it
really just helps them provide some of the characteristics investors
like about bond ladders, but through a more efficient vehicle.
The fixed-income universe dwarfs the equity universe in terms of market cap and the number of securities, but fixed-income ETFs haven’t really caught up to those numbers in comparison with equity ETFs. Where do you see the room to grow? If you look at the fixed-income ETF market in the U.S. now, it’s about
$280 billion. If you look at the entire market globally, it’s just over
$400 billion. And that represents a lot of growth for an asset class
that really only came into existence in 2002. But the reality is, ETFs
are still very small compared to the overall fixed-income market,
which, depending on how you measure it, is somewhere around $100
trillion globally. Today, fixed-income ETFs represent only 0.40 per-
cent of the global fixed-income market. Comparatively, equity ETFs
today represent over 3 percent of the global equity market.
If you just have fixed-income ETFs grow to be the same percent-
age of the fixed-income market, you’re talking about an increase of
seven or eight times the current size. For me, it’s actually not that
difficult to imagine that you’d get to a fixed-income ETF market that
could be a couple trillion dollars over the next decade, just as you see
the market grow and investor adoption increase.
The second part of this—which makes me very optimistic about
the future of fixed-income ETFs—is that I firmly believe that the ben-
efits to the investor of the fixed-income ETF are even greater than the
benefits provided by the equity ETF.
On the fixed-income side, we’ve taken the over-the-counter
bond market—with all its challenges around lack of information, lack
of access, and high cost—and moved it into a completely different
market: the exchange. I think that is transformational, as it improves
access and liquidity in fixed-income markets for all investors.
*Source: iShares and BlackRock, as of 9/30/2014
Visit www.iShares.com or www.BlackRock.com to view a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing.
Investing involves risk, including possible loss of principal. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities.
Shares of ETFs trade at market price, which may be greater or less than net asset value. The iShares® iBonds® ETFs (“Funds”) will terminate within the month and year in each Fund’s name. An investment in the Fund(s) is not guaranteed, and an investor may experience losses and/or tax consequences, including near or at the termination date. In the final months of each Fund’s operation, its portfolio will transition to cash and cash-like instruments. As a result, its yield will tend to move toward prevailing money market rates, and may be lower than the yields of the bonds previously held by the Fund and lower than prevailing yields in the bond market.
Buying and selling shares of iShares Funds will result in brokerage commissions. Diversification may not protect against market risk, loss of principal or volatility of returns.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by JPMorgan Chase & Co.,nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with JPMorgan Chase & Co.
iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners. iS-13736-1014
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26 ETF.com/ETF Report
Are you bullish or bearish on gold in 2015?
RICK RULE: Quite bullish; sentiment is very negative. Markets move up when they exceed expectations, and expectations could not be lower.
MIKE McGLONE: I am bullish. There is good potential that the price of gold in U.S. dollars may be bot-toming near the widely watched $1,200/oz level as we speak. We estimate this area as the all-in cost of production for gold, and it was a key inflection point last year that brought about significant physical buying, notably from the East. Major disturbances occurred in the gold and precious metals derivatives market last year on the approach to $1,200, indicat-ing it was a key stress level.
It’s worth noting that the price of gold in terms of the euro currency is up about 9% year-to-date com-pared to a U.S. dollar price increase of about 1% [at the time of this interview]. Gold is the quintessential currency, and increasing currency volatility should ulti-mately benefit gold.
DENNIS GARTMAN: It depends upon whether one asks me that question for gold in U.S. dollar terms or for gold in terms of other foreign currencies. For gold in U.S. dollar terms, I’m agnostic; I don’t care much at all. I can make you the bullish case and I can make you the bearish case. I could probably lean towards the bearish case slightly more certainly, but not dramatically.
On the other hand, if you asked me my view of gold in terms of yen, I’m phenomenally bullish. If you ask me if I’m bullish of gold in terms of the euro, I’m phenomenally bullish. Because I see gold as being nothing more than another currency, I see those two currencies as being under duress, and I see gold as being the better of those currencies. Gold in yen terms can go demonstrably higher; gold in euro terms can go demonstrably higher.
ED D’AGOSTINO: I’m moderately bullish for 2015. But rather than describe my position as bullish or bearish, a better way to outline my view on gold is to say gold is an essential asset class to own in 2015. I’m not predict-ing a major price move. Barring any major geopolitical events, I believe we will see low double-digit growth in gold in 2015. But investors must have exposure to gold. There is simply too much risk in the world not to have an allocation.
VIEWS ON
GOLD4Gold has attempted to claw back from one of its worst performances ever, in 2013, but is this merely a pause before the downtrend resumes the early stages of another bull run? In any case, how much gold should an investor hold in a diversified portfolio? ETF Report sat down with four experts to help sort out the outlook for gold: Rick Rule, director, president and chief executive officer of Sprott US Holdings; Mike McGlone, director of U.S. research for ETF Securities; Dennis Gartman, editor and publisher of The Gartman Letter; and Ed D’Agostino, publisher of Mauldin Economics and general manager of Hard Assets Alliance.
Our panel of experts discuss gold’s outlook, proper allocation and what would need to
happen to change their views
By Sumit Roy
26 ETF.com/ETF Report
27NOVEMBER 2014
What will be the biggest driver of prices next year?
RULE: A renewed investor concern about the U.S. economy and the U.S. federal deficit. Any improvement in East and South Asian economies would help too, as Asian retail physical demand is important.
McGLONE: An end to the stock market rally would likely be a key driver when that eventually happens, as it has been the only game in town and has drawn the most capital and attention. We are not predicting a time frame for that, but when it happens, gold is likely to be a primary beneficiary. More fundamentally, a continuation of declining sovereign debt yields should be a key driver for higher gold prices.
There are currently 10 European countries with two-year note yields that are negative, including France and Germany. This is something one would expect in a Lehman-type event, yet in this case, it appears more sustainable. The ratio of the U.S. 10-year yield to that of the German bund 10-year yield is currently about 2.6. This extreme level of yield disparity has never happened in the modern financial system (since 1990 in our bund/U.S. Treasury database). The highest ratio before this year was 1.5.
GARTMAN: Geopolitical forces will be of secondary importance next year. Monetary policies will be of primary importance. And it’s for the monetary reasons that I’m bullish on gold in yen and euro terms. There’s no question that Japan and Europe have lagged far behind the United States when it comes to the expan-sion of their monetary aggregates.
They need to expand their monetary aggregates. Japan absolutely must. Europe has been a terrible lag-gard and its economy has suffered dramatically because of that. So it will be an expansion of the monetary aggre-gates that will take gold in euros and gold in yen higher.
D’AGOSTINO: There are two main drivers. First, geo-political risk is very high right now. ISIL threatens to completely disrupt an already-unstable Middle East. Make no mistake, ISIL’s efforts are all centered on one outcome—war. And they just may get it, as the world likely has no choice but to engage. Implementation and coordination will determine both the outcome and the way the East views the West, moving forward. Getting this right will be tricky, to say the least. Strange bed-fellows will be formed before this fight is over.
The second driver is financial. Major economies are undergoing massive changes right now. In the West, recovery from the financial crisis is slow, despite mas-sive government intervention and central bank balance sheet expansion. As I write, global stock markets are flirting with a correction, the U.S. housing market is stalling, consumer sentiment is falling and commod-ity prices are collapsing. The only factor holding down gold’s price is the “flight to safety” trade, with global investors fleeing to the U.S. dollar. This is a risky bet, and sooner or later some of the flight capital will be redirected to gold.
How much of an investor’s portfolio should be allocated to gold?
RULE: About 10% between bullion and miners, depend-ing on the investor’s age, wealth and the composition of the rest of the portfolio. Long-bond investors should own more.
McGLONE: Depending on the investor, between 5 and 20% potentially, with some of the overall mix in other commodities. We prefer to focus on an index or basket of precious metals (gold, silver, platinum and palla-dium) as it can provide superior, longer-term portfolio enhancement and augmentation with similar exposure to emerging market demand than a broader basket of commodities, but without the issues of using deriva-tives and dealing with backwardation or contango in the futures market.
In the current market, with most precious metals at steep discounts from the highs reached a few years ago and with stocks quite richly valued, it seems prudent to look to overweighting precious metals in portfolios, just as it was prudent to underweight gold when it hit $1,900 in 2011. Precious metals are one of the few asset classes with a solid history of low or negative correla-tion to stocks; thus, they have a higher tendency to enhance and augment portfolio returns.
GARTMAN: On balance, everybody should have some-where between 2 and 7% of their worth in gold.
D’AGOSTINO: That’s a question that needs to be addressed at the individual level, of course, based on age, wealth, etc. For the individual with a reasonable amount of wealth, a minimum allocation ranging from 10 to 20% of investable assets is reasonable. The case
27NOVEMBER 2014
28 ETF.com/ETF Report
can be made for a larger allocation, depending on your goals and your global outlook.
What would make you change your outlook on gold?
RULE: A real economic recovery in the U.S., with increases in labor market participation, real wages and capital goods spending, and a successful interest-rate hike.
McGLONE: Generally, historically, the worst environ-ment for gold has been disinflation (declining inflation) with high real yields, such as in the 1990s. There is not much room for disinflation with inflation cur-rently so low so that it is not much of a risk. A sharp pickup in sovereign debt yields with less of a pickup in inflation would be bad for gold (rapidly increasing real yields) but again, is not likely. Other factors that could pressure gold are a continued rally in the U.S. equity markets; a sustained rally in the U.S. dollar; aggressive central bank tightening; a sharp decline in the price of oil; or a sharp reduction in the U.S. debt to GDP ratio.
GARTMAN: If the Fed were to say inflation simply has never gotten anywhere close to its hoped-for 2% and that we would have QE4, that would change my opin-ion. It would drive me from being agnostic to being supportive of gold in dollar terms.
D’AGOSTINO: Financial stability as demonstrated by a reduction in real debt levels of Western governments and a global GDP growth rate in excess of 5%; a smooth transition in China from an export economy to a consumer-based economy; world peace; or maybe a uni-corn sighting. In other words, I don’t see my outlook on gold changing in the near future.
Anything else you’d like to add?
RULE: Gold will continue to be an important component in global retail savings, especially among Asian workers who have a long cultural affinity for the metal, and a healthy disrespect for their own currency. An increas-ing realization at home and abroad that the U.S. 10-year Treasury is a long-term wealth destroyer as a savings instrument could lead to both private and official sector rebalancing, which would favor gold. In the gold equi-ties, a gradual realization that investment efficiency is more important than leverage to the gold price will begin to improve corporate performance over time.
McGLONE: Some of the developments of 2014 have been quite positive for building a foundation for a sustained rally in the price of gold. The global decline in sovereign
debt yields is a strong net positive for the price of gold. Along with the decline in the price of most industrial commodities, it is also indicating the global recovery may be on much less sound footing than most analysts expect. If the market ends the year with gold having sustained above $1,200 an ounce and the equity market shows signs of stumbling, the foundation would be quite positive for gold to start 2015.
Another significant trend in the precious met-als market has been the migration of demand to the emerging markets. This is not your father’s precious metals market. Emerging markets had virtually no participation during the last bull market in the 1970s. In 2013, emerging markets accounted for about 60% of total precious metals demand, up from about 33% in 2003 and only 25% in 1993. The trend is clear: Rap-idly increasing emerging market per capita incomes are helping to drive the increase in precious metals demand, a trend that is unlikely to reverse.
GARTMAN: Far too much time is spent on the part of the gold bugs worrying about defending, investigat-ing, paying attention to the notion of manipulation of gold prices. Who cares? It’s a waste of time and effort. Whether it is or is not manipulated is unimportant. If it is, it is already discounted in the price. If it is not, it is already discounted in the price. What a great waste of time on the part of the bugs to worry about manipu-lation. If they would spend half as much time trying to find a cure for major diseases as they try to find proof of manipulation, the world would be a better place.
D’AGOSTINO: There are many ways to gain exposure to gold, from investing in the equities of mining compa-nies, to ETFs, to physical precious metals. A blend of these three basic strategies can be very powerful, and they serve different functions.
Metals-based ETFs are fantastic for trading on vola-tility. Mining stocks and their related ETFs currently offer massive leverage to gold prices. With mining stocks being so beaten down and forsaken by the broad market, many of those companies have tightened up operations and reduced overhead. It’s hard not to load up on mining stocks right now at current prices; this could be the trade of the decade.
But I encourage investors to remember, when turn-ing to gold as store of wealth, a hedge against instabil-ity, and a de facto insurance policy against risk, there is no substitute for physical gold. Store it in a nonbank facility and make sure you own the metal outright —not fractional, but a fully allocated physical precious metal. If things get really ugly, you want the option of holding your metal in your hand.
28 ETF.com/ETF Report
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Important Information Relating to SPDR Gold Trust: The SPDR Gold Trust (“GLD”) has fi led a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the off ering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents GLD has fi led with the SEC for more complete information about GLD and this off ering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov or by visiting www.spdrgoldshares.com. Alternatively, the Trust or any authorized participant will arrange to sendyou the prospectus if you request it by calling 1-866-320-4053.
ETF’s trade like stocks, are subject to investment risk, fl uctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and GLD expenses will reduce returns.Diversifi cation does not assure a profi t and may not protect against investment loss.Investing in commodities entails signifi cant risk and is not appropriate for all investors.
“SPDR” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and has been licensed for use by State Street Corporation. No fi nancial product off ered by State Street Corporation or its affi liates is sponsored, endorsed, sold or promoted by S&P or its affi liates, and S&P and its affi liates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. Further limitations that could affect investors’ rights may be found in GLD’s prospectus. For more information: State Street Global Markets, LLC, One Lincoln Street, Boston, MA, 02111 • 866.320.4053 • www.spdrgoldshares.com. Not FDIC Insured – No Bank Guarantee – May Lose Value
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Important Information Relating to SPDR Gold Trust: The SPDR Gold Trust (“GLD”) has fi led a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the off ering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents GLD has fi led with the SEC for more complete information about GLD and this off ering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov or by visiting www.spdrgoldshares.com. Alternatively, the Trust or any authorized participant will arrange to sendyou the prospectus if you request it by calling 1-866-320-4053.
ETF’s trade like stocks, are subject to investment risk, fl uctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and GLD expenses will reduce returns.Diversifi cation does not assure a profi t and may not protect against investment loss.Investing in commodities entails signifi cant risk and is not appropriate for all investors.
“SPDR” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and has been licensed for use by State Street Corporation. No fi nancial product off ered by State Street Corporation or its affi liates is sponsored, endorsed, sold or promoted by S&P or its affi liates, and S&P and its affi liates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. Further limitations that could affect investors’ rights may be found in GLD’s prospectus. For more information: State Street Global Markets, LLC, One Lincoln Street, Boston, MA, 02111 • 866.320.4053 • www.spdrgoldshares.com. Not FDIC Insured – No Bank Guarantee – May Lose Value
Astute investors look for opportunities to
enhance the diversifi cation potential of their
portfolio. One way to achieve this is with an
investment in gold.
When you invest in SPDR® Gold Shares, you
get a precise way to add gold to your portfolio
because it’s not an index or derivative. With
GLD, all of your shares are backed 100% by
physical gold.
If you’re an independent thinker, scan the
QR code with your smartphone or visit us at
spdrs.com/GLD for details.
32 ETF.com/ETF Report
GOLD PRICES PLUMMET IN 2013This was most starkly illustrated in 2013, when global gold demand tumbled 15%, yet China’s demand hit a record and India’s demand hit the third-highest level ever. In essence, there was a transfer of gold from West to East, with U.S. and European inven-tors dumping their holdings via exchange-traded funds, while millions of individual Asian investors bought the physical metal.
According to the World Gold Coun-cil, Western investors—primarily in the U.S. and Europe—cut their holdings in gold-backed ETFs by a third, or 881 metric tons. At the same time, investors in physi-cal gold— primarily in China and India—increased their purchases by 361 metric tons, or 28%, to a record 1,654 metric tons.
While the jump in physical demand wasn’t enough to offset the furious selling in ETFs, it eventually helped create a floor in gold prices near $1,180 last June.
ASIAN DEMAND COOLS, CENTRAL BANKS BUYFast-forward to today, and the $1,180 low is still holding as ETF holdings stabilize.
Only 72 metric tons has come out of gold exchange-traded funds so far in 2014. On the other hand, demand for physical gold has cooled significantly from the tor-rid pace of last year. WGC figures show
Gold prices have been relatively stable in 2014, at least when compared with the enormously volatile trading action of 2013. Are prices bottoming out? Or is the yellow metal ready to take another plunge as the Federal Reserve gets set to raise interest rates next year?
Those are the questions everyone is asking, but the answer may not depend on what happens in the U.S. at all, but rather what happens in Asia.
Indeed, much is written about what’s going on in the U.S. and what the Fed is doing and how all that will impact gold, but the vast majority of gold buyers are actually in China and India. The two countries account for nearly half of global gold demand, and show no signs of losing their appetite for the metal anytime soon.
KEYTO GOLD DEMAND
J F M A M J J A S O N D J F M A M J J A S2013 2014
2,700
2,500
2,300
2,100
1,900
1,700
1,500
METRIC TONS
GOLD ETF HOLDINGS (2013-PRESENT) FIGURE 1
As global gold demand shifts from West to East, U.S. monetary policy may not matter as much as it used to
By Sumit Roy
32 ETF.com/ETF Report
Source: Bloomberg, data as of 10/1/2014
33NOVEMBER 2014
that through the first half of the year, physical investment demand totaled only 561 metric tons, down a whopping 49% year-over-year.
Clearly, the urgency to buy gold in Asia has diminished now that prices have stopped falling. But that doesn’t mean Chi-nese and Indian investors are giving up on gold. The yellow metal is deeply tied to Asian culture and is used widely in wed-dings and other festivals.
Gold is also seen as the pre-eminent store of value, a status legitimized by steady buying by central banks, which became net buyers of the metal in 2011 after two decades of selling. Those central banks—made up primarily of emerging markets such as Russia, South America and others—continued buying last year through the plunge, purchasing 370 metric tons. This year, they’ve bought 242 metric tons through the first half of the year.
Buying by central banks is “based on how they see their foreign reserves and the diversification those reserves need,” explained Juan Carlos Artigas, who leads investment research in the U.S. for the World Gold Council. “Given that many of these emerging market central banks have large exposure to the dollar, it’s very natu-ral for them to be on that continuous path of diversification.”
LOOKING FORWARDEven though physical investment demand this year is at half the levels of last year, it’s still at historically high levels. In fact, it’s up nearly three times from where it was before 2008, when the financial crisis sent gold demand skyrocketing.
As emerging market economies in Asia and elsewhere continue to grow, demand for gold is likely to rise in step. This year’s pullback notwithstanding, the trend is up for gold demand in these regions.
That leaves Western investors as the missing piece of the puzzle. Without the
interest of ETF investors in the U.S. and Europe, can gold prices rally?
From a fundamental perspective, it stands to reason that they can. An addi-tional ounce of demand is an additional ounce of demand, whether it comes from the West or the East.
“Investors need to stop focusing purely on Western-centric measures of perfor-mance or Western-centric influences on the gold price,” argued Artigas. “We feel the gold market is far more global than just a U.S. or a European investment.”
That said, if Western investors con-tinue to sell their stockpile of gold in ETFs—which last stood at 1,684 metric tons as of this writing—that will cap any rallies in gold, and potentially send prices below last year’s $1,180 low. With Federal Reserve monetary policy at a crucial inflec-tion point, the coming months will be a key test for the yellow metal.
Regardless of what happens in the short term, eventually even the Western inves-tor may come back into gold. Whether it be as a tool for portfolio diversification or a hedge against the next inevitable eco-nomic shock, there are ample reasons to own gold.
At some point, capital will come flow-ing back into gold ETFs, fueling the next bull market in prices.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2,000
1,500
1,000
500
0
TONNES
TOTAL BAR AND COIN DEMAND (ROLLING 4 QUARTERS) FIGURE 2
J F M A M J J A S O N D J F M A M J J A S2013 2014
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,000
$/TROY OUNCE
SPOT GOLD (2013-PRESENT) FIGURE 3
33NOVEMBER 2014
Source: World Gold Council
Source: Bloomberg, data as of 9/30/2014
34 ETF.com/ETF Report
NO BOOST FROM GOLD PRICESTraditional wisdom argues that gold stocks act as a leveraged play on the underlying metal. When the price of gold rises, producers should see out-sized gains. Likewise, when gold falls, miners should plummet.
However, neither GDX nor GDXJ were able to benefit from the rise in gold prices. Although GDX launched squarely in the middle of gold’s bull run in 2006, the ETF has dropped 42% in value since its inception. GLD, meanwhile, has maintained gains of 80% over the same period. And that’s with the gold bust factored in.
Juniors have fared little better. GDXJ, which launched in 2009, has dropped 66% since incep-tion. Over the same period, GLD rose 9%.
In fact, it seems like the only leverage gold miner ETFs offer is the downside kind. Since mid-2011, GDX and GDXJ have vastly outpaced losses in physical gold, with a slide that anticipated GLD’s eventual decline by several months (see Figure 1).
Talk about getting what you want, in all the worst ways.
Since the decade-long surge in gold prices ran out of steam in September 2012, the physically backed SPDR Gold Trust (GLD|A-100) has shed a whopping 32% of its value. The Market Vectors Gold Miners ETF (GDX|B-73), however, has fared far worse. The fund, which tracks 40 of the world’s largest gold producers, has plummeted 59% over the same period.
Junior miners suffered even more. The Market Vectors Junior Gold Miners ETF (GDXJ|D-28), which samples 62 small-cap producers, has lost 65% since September 2012.
Many gold producers have taken drastic measures to resuscitate their share prices, leading many investors to wonder if gold stock ETFs will end up benefiting from their efforts.
But those seeking a silver—or gold—lining to this cloud may want to keep looking. The fundamentals suggest more troubled times lie ahead.
As brutal as the past two years were for gold, they
were even worse for gold miners
By Lara Crigger
34 ETF.com/ETF Report
35NOVEMBER 2014
THE WORST KIND OF GOLD LEVERAGEOne thing’s for certain, though: All this drama hasn’t dampened investor interest in miners. GDX remains the market’s second-largest gold-related ETF; as of Sept. 25, it still had assets under management of $6.7 billion and a daily trading volume of roughly 28 million shares.
Poor performance has begun to alter how investors approach gold stocks, however. This year, rattled investors have pulled $305 mil-lion from GDX, while at the same time pouring roughly $1.15 billion into GDXJ.
It’s not hard to see why. So far in 2014, the little guys have outperformed the majors almost threefold, with GDXJ rising 13% year-to-date compared with GDX’s 5%.
However, in the short term, neither fund seems to be doing all that hot. GDX is down about 14% over the past three months, while GDXJ has fallen 12%. The trend shows no signs of slowing, either.
So if they’re going to get burned, why do investors keep coming back to mining ETFs?
“Precious metals and precious metals equities are among the most cyclical and volatile markets in existence. That in itself attracts some inves-tors,” said Rick Rule, CEO and founder of Sprott Global Resource Investments.
And you can’t overlook the equity play, said Chris Thompson, precious metals analyst for Raymond James: “While GDX and GDXJ have per-formed poorly, they represent a convenient way for investors to invest in a basket of precious met-als equities. The appeal of gold equities is lever-age to management teams’ success in growing their businesses, through the delivery of opera-tional and exploration success, and adding value through M&A.”
CUTTING COSTS, HAMPERING GROWTHAs Thompson points out, the fates of miners aren’t dictated solely by the price of gold, but also the cost of mining that metal in the first place.
Gold mining is a hard business. Extraction is difficult and expensive, and bringing new proj-
ects online can cost billions of dollars and take the better part of a decade. Obviously profits can be and are achieved—otherwise nobody would bother—but many producers tend to underper-form year after year.
Still, gold’s precipitous drop forced even the largest majors to do some serious soul searching.
After witnessing its share price drop 47% in 2013, Barrick Gold (NYSE: ABX), the world’s largest producer, announced it would scale back global operations and refocus attention on domestic efforts. The miner also dumped its entire corporate development team over the sum-mer; CEO Jamie Sokalsky was scheduled to step down this fall.
Similar woes have plagued Newmont Min-ing (NYSE: NEM), the world’s second-largest pro-ducer, whose stock price dropped 23% after the company posted $2.5 billion losses for 2013. New-mont responded by selling off some $1.3 billion in lower-growth assets to boost its balance sheet.
The jury’s still out on whether these efforts will be successful. Newmont, for example, has
2011 2012 2013 2014
20%
10
0
-10
-20
-30
-40
-50
-60
-70
-80
RETURN
GOLD-RELATED ETF PERFORMANCE, 12/31/2012-9/30/2014 FIGURE 1
35NOVEMBER 2014
Source: Bloomberg, 9/30/2011-9/30/2014
GLD
GDX
GDXJ
36 ETF.com/ETF Report
risen 3.5% year-to-date. Barrick, on the other hand, is still down 13% for the year.
COMMON THREAT AMONG MINERSBarrick and Newmont are far from outliers. Almost every other gold producer, large and small, has scrambled to pacify irate shareholders by cutting costs.
Many miners have slashed exploration bud-gets and suspended operations at higher-cost proj-ects, preferring instead to sell gold from stock-piled ore. Others have doubled down on efforts to extract higher-grade gold from the ground. Still others have trimmed personnel and hacked away at employee benefits. Most companies have tried all of the above.
On the surface, these austerity measures appear to be working: GFMS estimates that in the first half of 2014, miners slashed their all-in cost of production to $1,350/oz., a decrease of 20% from 2013.
Of course, should mine capacity drop and out-put slow, that could help establish a new floor under the gold price. Miners would in turn benefit.
That is, if they can survive until then. And it’s a pretty big “if.”
“Investor aspirations for gold equities were established in the great 1970-1980 bull market,” said Rule. “The best-performing stocks were the ones most leveraged to the increases in the com-modity price, or the most marginal or aggressive. This has caused the financial community to ask miners to focus on leverage to the gold price. Ironically, we have demanded that the industry be marginal—an easy task, and one it has sadly focused on.”
THE FUNDAMENTALS MATTERWhen it comes to the fortunes of gold miners, the fundamentals of the underlying market mat-ter as much as, if not more than, the metal’s day-to-day price.
As low as that is, however, it’s still higher than the spot price of gold, which hovers around $1,200-$1,240/oz.
Furthermore, most of these cost-cutting mea-sures can only offer one-time or short-term relief. Producers have found it much harder to pare operating costs, such as labor, energy and fuel—ongoing expenditures that often depend on exter-nal forces, and which rose 60% between 2008 and 2012, according to Reuters.
“Costs haven’t moved because marginal oper-ations haven’t been shut down; management teams want to retain operational optionality should prices recover,” noted Thompson. Much of the industry is barely making money at cur-rent price levels, and may suffer significantly if operations are shut down.”
Reducing exploration or investment in new mines could hamstring future production, as well as limit producers’ ability to capitalize on any rebound in gold prices.
SHOULD MINE CAPACITY DROP AND OUTPUT SLOW, THAT COULD HELP ESTABLISH A NEW FLOOR UNDER THE GOLD PRICE
Gold’s price may have finally begun to stabi-lize, or at least slow its descent, but the yellow metal still faces head winds, including a strong U.S. dollar and the increasing likelihood that the Fed will raise interest rates in 2015.
In addition, gold demand worldwide has slackened. According to the World Gold Council, demand fell 24% year-over-year as of the second quarter of this year. Jewelry demand slumped by more than a third, while bar and coin investment plummeted 60%.
The cause? Reduced buying out of demand centers like China and India; there, the gold frenzy of the past year or so has worn itself out, replaced by “needs-based” buying much closer to five-year averages.
Should gold’s fundamentals improve, that will ultimately only mean good things for gold miners long term. But investors would be wise to remain patient, and wait for signs of stabili-zation first.
36 ETF.com/ETF Report
37NOVEMBER 2014
When did you first invest in the Vanguard Global ex-U.S. Real Estate ETF (VNQI|B-78)? Have you added to or reduced your holdings since then? We first added it to our portfolios in August 2011. At that time, we made it about 3.5% of our total equity allocation. We then decided to increase that in January 2012, up to 5%. We’ve maintained it there ever since.
How do you use VNQI in your portfolios?It’s a strategic position. The way we structure our port-folios, our equity benchmark is the MSCI All Country World Index, so we’ll always carry a certain percentage in international equities. We put some of that in inter-national real estate to get more income than what we’d get from just traditional international common stocks.
Why choose VNQI over other international real estate ETFs? For starters, its expense ratio is only 27 basis points, so VNQI gets you the lowest-cost exposure in that space. Compare that to a traditional mutual fund, which, according to Vanguard, has internal expenses of 1.37%. Even the average international real estate ETF is 0.51%. One of my core beliefs is that fees matter, so we try to minimize fees wherever possible.
Secondly, VNQI has the largest number of holdings, at over 500. So not only is it the lowest cost of the international real estate ETFs, but it’s also the most diversified. Thirdly, VNQI gives us about 17-18% exposure to emerging markets. I believe that everyone should have exposure to emerging markets; VNQI is really the only international real estate ETF to offer it.
You feel that way, even though emerging markets have hit a slump?Absolutely. From a strategic point of view, you need exposure to the burgeoning middle classes around the world. Just look at what
we saw with Alibaba going public. We’re not a firm that says, “Now’s the time to own emerging markets” or “Now’s the time not to.” We take the long view. If you want the benefit of rising incomes, consumer spending and everything else that will drive emerging real estate prices, VNQI is one of the only ways to get it.
What downsides are there to owning VNQI? Obviously, international real estate is more volatile than U.S. real estate. No doubt about it. When you buy a U.S. real estate ETF, like VNQ, it’ll be primarily REITs. On the international side, however, most companies are developers, which are riskier. Sixty to 65% of VNQI’s holdings are real estate developers and non-REIT prop-erty managers. That means greater volatility.
In addition, the exposure to emerging markets does create more volatility. Even where the companies are in developed markets, many of those markets work with and benefit from emerging economies. So if China slows down, so does Hong Kong, Australia and so on.
What would be the trigger for you to get out of VNQI? If we decided to dramatically overweight U.S. equities and reduce our international exposure, I’d look at this as one of the places to pull funds. But that would be more of a strategic decision, rather than, “Oh, something hap-pened in China; it’s time to get out.” We might pull from the fund if it started to drift from its underlying index. If we’re going to be indexers and buy index-based ETFs, then they’d better stick pretty close to the index! Also, this fund does not hedge its currency positions. So if there were dramatic changes in the currency, that could affect performance. We might pull then.
VNQI
STRATEGY
Vanguard Global ex- U.S. Real Estate ETF
I OWNWHY
FIRM: ETF Portfolio Partners
LOCATION: Leawood, KS
FOUNDED: 2004
AUM: $125 Million
ALL ETFs? Yes
RICH ROMEYChief Investment Officer
Vanguard Global ex-U.S. Real Estate ETF (VNQI)
EQUITY: Equity: Developed Markets Ex-U.S.-Total Market
ISSUER: Vanguard
LEGAL STRUCTURE: Open-Ended Fund
EXPENSE RATIO: 0.27%
AUM: $2.05 Billion
AD$V (30-DAY): $8.23 Million
AVG. SPREAD: 0.10%
COMPETING FUNDS: RWX, DRW, WPS, IFGL
Sources: Bloomberg, ETF.com. Chart data as of 9/30/2014; all other data as of 10/14/2014.
1086420
-2-4-6-8
-10
RETURN%
0.32%
O N D J F M A M J J A S2014
By Lara Crigger
38 ETF.com/ETF Report
After last month’s respite, not a single sector managed to average positive returns. Energy was hit hardest, averaging losses of more than 10%, as well as claiming the top slot for most redemptions. The sector saw out-flows of slightly more than $1 billion. Oddly enough, the SPDR S&P Oil & Gas Exploration & Production (XOP|A-50) proved to be a bright spot for the sector, managing to just make this month’s biggest inflows table, garnering $296 million despite its 12.74% performance loss. Con-sumer non-cyclicals and financials fared rather better, averaging losses around 0.35% apiece, while accounting for the top two highest inflows for September. However, health care is surprisingly this month’s best performer, as the iShares U.S. Pharmaceuticals (IHE|A-65) gained 2.37%. Meanwhile, the SPDR S&P Metals and Mining (XME|A-42) came in last, with losses of 15.61% dragging down basic materials. Utilities are still taking a beating in flows; investors moved $762 million out of the belea-guered sector, coming in just behind energy for most redemptions in September.
September left sectors seeing red.
BASIC MATERIALS CONS. CYCL. CONS. NON-CYCL. ENERGY FINANCIAL HEALTH CARE INDUSTRIAL REAL ESTATE TECH TELECOM UTILITIES
BROADXLB
-1.44%
BROADXLY
-2.77%
BROADXLP
0.53%
BROADXLE
-7.82%
BROADXLF
-0.41%
BROADXLV
0.42%
BROADXLI
-1.20%
BROADIYR
-5.82%
BROADXLK
-0.57%
BROADIYZ
-2.07%
BROADXLU
-1.89%
MININGXME
-15.61%
HOMEBLDXHB
-6.07%
FOODPBJ
-1.17%
EQUIPIEZ
-9.76%
BANKSKBWB0.24%
BIOTECHIBB
-1.17%
DEFENSEPPA
-0.72%
BROADVNQ
-5.98%
INTERNETFDN
-1.90%
BROADVOX
-1.55%
BROADVPU
-2.70%
MEDIAPBS
-2.48%
EXPLORXOP
-12.74%
BANK & INIAI
0.20%
MED DEVIHI
-2.73%
TRANSPOIYT
0.25%
SEMISXSD
-4.64%
RETAILXRT
-3.54%
INSURANCEKBWI
-2.34%
PHARMAIHE
2.37%
ENGINEERPKB
-6.69%
SOFTWAREIGV
-2.13%
LEISUREPEJ
-1.11%
SERVICESIYG
0.42%
EQUIPMENTXHE
-3.42%
SERVICESIHF
-2.48%
Sector Performance SEPTEMBER 2014
///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
≤-5
.0-3
.0 ≤
-4.9
-1.0
≤-2
.9-0
.1 ≤
-0.9 0
0.1
≤ 0
.91.
0 ≤
2.9
3.0
≤ 4
.9≥
5.0
KEY:
+
Source: Bloomberg. Data from 08/29/2014 to 09/30/2014. ETFs chosen to represent each sector based on the most liquid ETF in each segment of the ETF.com ETF Classification System.
-
IN REVIEW
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Top Outflows
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Top InflowsTICKER NET FLOWS AUM ($M)
Consumer Staples Select SPDR XLP 737.89 7,575.86 Cons. Non-cycl.
iShares U.S. Industrials IYJ 473.52 1,794.17 Industrials
Consumer Discretionary Select SPDR XLY 395.58 6,712.76 Cons. Cyclicals
Financial Select SPDR XLF 320.67 18,665.21 Financials
SPDR S&P Oil & Gas Exploration XOP 296.12 1,383.65 Energy
TICKER NET FLOWS AUM ($M)
iShares U.S. Energy IYE -968.01 1,134.10 Energy
iShares U.S. Utilities IDU -460.50 652.49 Utilities
Energy Select SPDR XLE -311.54 10,242.04 Energy
Utilities Select SPDR XLU -287.48 5,487.21 Utilities
Materials Select SPDR XLB -282.30 5,107.88 Basic Materials
By S.M. Brorup
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, call 1-866-SECTOR-ETF or visit www.sectorspdrs.com. Read the prospectus carefully before investing.The S&P 500, SPDRs, and Select Sector SPDRs are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use. The stocks included in each Select Sector Index were selected by the compilation agent. Their composition and weighting can be expected to differ to that in any similar indexes that are published by S&P. The S&P 500 Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. Investors cannot invest directly in an index. The S&P 500 Index figures do not reflect any fees, expenses or taxes. Ordinary brokerage commissions apply. ETFs are considered transparent because their portfolio holdings are disclosed daily. Liquidity is characterized by a high level of trading activity.Select Sector SPDRs are subject to risks similar to those of stocks, including those regarding short-selling and margin account maintenance. All ETFs are subject to risk, including possible loss of principal. Funds focusing on a single sector generally experience greater volatility. Diversification does not eliminate the risk of experiencing investment losses. ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust.
Potential benefits of adding Sector SPDR ETFs to your portfolio include:
• Undiluted exposure to a specific sector of the S&P 500
• The all-day tradability of stocks
• The diversification of mutual funds
• Total transparency
• Liquidity Visit www.sectorspdrs.com or call 1-866-SECTOR-ETF
Time For A Stock Alternative
Financial Sector SPDR ETF
1 Berkshire Hathaway B BRK.b 8.82%2 Wells Fargo WFC 8.63%3 JP Morgan Chase JPM 7.93%4 Bank of America BAC 6.28%5 Citigroup C 5.50%6 American Express AXP 2.76%7 American Intl Group AIG 2.70%8 US Bancorp USB 2.64%9 Goldman Sachs GS 2.63%10 Metlife MET 2.12%
Company Name Symbol Weight
XLF - FINANCIAL
* Components and weightings as of 9/30/14. Please see website for daily updates. Holdings subject to change.
Top Ten Holdings*
Consumer Discretionary - XLY Consumer Staples - XLP Energy - XLE Financial - XLF Health Care - XLV Industrial - XLI Materials - XLB Technology - XLK Utilities - XLU
WHY BUY A SINGLE STOCK WHEN YOU CAN INVEST IN THE ENTIRE SECTOR?
ADVERTISEMENT
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, call 1-866-SECTOR-ETF or visit www.sectorspdrs.com. Read the prospectus carefully before investing.The S&P 500, SPDRs, and Select Sector SPDRs are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use. The stocks included in each Select Sector Index were selected by the compilation agent. Their composition and weighting can be expected to differ to that in any similar indexes that are published by S&P. The S&P 500 Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. Investors cannot invest directly in an index. The S&P 500 Index figures do not reflect any fees, expenses or taxes. Ordinary brokerage commissions apply. ETFs are considered transparent because their portfolio holdings are disclosed daily. Liquidity is characterized by a high level of trading activity.Select Sector SPDRs are subject to risks similar to those of stocks, including those regarding short-selling and margin account maintenance. All ETFs are subject to risk, including possible loss of principal. Funds focusing on a single sector generally experience greater volatility. Diversification does not eliminate the risk of experiencing investment losses. ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust.
Potential benefits of adding Sector SPDR ETFs to your portfolio include:
• Undiluted exposure to a specific sector of the S&P 500
• The all-day tradability of stocks
• The diversification of mutual funds
• Total transparency
• Liquidity Visit www.sectorspdrs.com or call 1-866-SECTOR-ETF
Time For A Stock Alternative
Financial Sector SPDR ETF
1 Berkshire Hathaway B BRK.b 8.82%2 Wells Fargo WFC 8.63%3 JP Morgan Chase JPM 7.93%4 Bank of America BAC 6.28%5 Citigroup C 5.50%6 American Express AXP 2.76%7 American Intl Group AIG 2.70%8 US Bancorp USB 2.64%9 Goldman Sachs GS 2.63%10 Metlife MET 2.12%
Company Name Symbol Weight
XLF - FINANCIAL
* Components and weightings as of 9/30/14. Please see website for daily updates. Holdings subject to change.
Top Ten Holdings*
Consumer Discretionary - XLY Consumer Staples - XLP Energy - XLE Financial - XLF Health Care - XLV Industrial - XLI Materials - XLB Technology - XLK Utilities - XLU
WHY BUY A SINGLE STOCK WHEN YOU CAN INVEST IN THE ENTIRE SECTOR?
40 ETF.com/ETF Report
U.S. EQUITY: TOTAL MARKET
iShares MSCI USA Momentum Factor MTUM 0.15 363.4 8.87 - -
Fidelity NASDAQ Composite ONEQ 0.21 405.4 8.54 24.46 17.31
WisdomTree Total Dividend DTD 0.28 512.6 8.29 21.01 15.88
iShares MSCI USA ESG Select KLD 0.50 275.1 8.23 19.98 14.09
iShares MSCI USA Value Factor VLUE 0.15 332.4 7.82 - -
iShares MSCI USA Minimum Volatility USMV 0.15 2,852.4 7.71 - -
iShares Dow Jones U.S. IYY 0.20 940.5 7.51 21.35 13.98
iShares Core S&P Total U.S. Stock Market ITOT 0.07 1,380.3 7.39 22.90 15.66
iShares MSCI KLD 400 Social DSI 0.50 384.7 7.18 22.03 14.62
Schwab U.S. Broad Market SCHB 0.04 3,605.3 7.09 23.10 -
Vanguard Total Stock Market VTI 0.05 45,833.2 6.93 23.12 15.86
FlexShares Quality Dividend QDF 0.38 511.0 6.84 - -
iShares Russell 3000 IWV 0.20 5,659.0 6.83 22.86 15.61
iShares MSCI USA Quality Factor QUAL 0.15 562.0 6.57 - -
FlexShares Morningstar U.S. Market Factor Tilt TILT 0.27 707.6 3.71 22.70 -
ALPS Barron's 400 BFOR 0.65 231.1 1.22 - -
U.S. EQUITY: TOTAL MARKET GROWTH
iShares Core U.S. Growth IUSG 0.09 492.6 6.86 22.27 16.26
U.S. EQUITY: TOTAL MARKET VALUE
iShares Core U.S. Value IUSV 0.09 715.6 7.13 23.52 14.88
U.S. EQUITY: EXTENDED CAP
Vanguard Extended Market VXF 0.10 3,429.2 1.09 23.63 16.47
PowerShares FTSE RAFI US 1500 Small-Mid PRFZ 0.39 958.9 -3.19 23.17 14.97
U.S. EQUITY: LARGE CAP
PowerShares QQQ QQQ 0.20 42,841.5 13.61 25.17 19.81
ALPS Sector Dividend Dogs SDOG 0.40 852.4 11.62 - -
First Trust NASDAQ-100 Equal Weighted QQEW 0.60 457.9 10.92 24.18 17.42
ProShares Large Cap Core Plus CSM 0.45 379.1 10.42 24.26 15.76
PowerShares S&P 500 High Beta SPHB 0.25 289.9 9.13 27.53 -
WisdomTree Dividend Ex-Financials DTN 0.38 1,187.4 9.03 20.34 18.34
WisdomTree LargeCap Dividend DLN 0.28 1,836.1 8.88 20.76 15.76
iShares S&P 100 OEF 0.20 4,493.3 8.56 22.33 14.95
Vanguard Mega Cap MGC 0.12 823.6 8.41 22.99 15.50
iShares Morningstar Large-Cap JKD 0.20 489.6 8.36 24.23 16.00
iShares Core S&P 500 IVV 0.07 61,119.8 8.27 22.93 15.65
Vanguard S&P 500 VOO 0.05 21,783.0 8.25 23.00 -
SPDR S&P 500 SPY 0.09 181,324.0 8.16 22.92 15.63
Vanguard Large-Cap VV 0.09 5,194.6 8.11 23.08 15.80
Schwab U.S. Large-Cap SCHX 0.04 3,197.5 8.07 23.02 -
Guggenheim Russell Top 50 Mega Cap XLG 0.20 531.8 8.04 21.49 14.17
Vanguard Russell 1000 VONE 0.12 385.5 8.02 23.18 -
iShares Russell 1000 IWB 0.15 9,851.6 7.83 23.11 15.79
Guggenheim S&P 500 Equal Weight RSP 0.40 8,677.1 7.54 24.33 16.99
PowerShares S&P 500 Low Volatility SPLV 0.25 4,540.0 7.40 17.21 -
PowerShares FTSE RAFI US 1000 PRF 0.39 3,812.3 7.25 24.01 15.42
PowerShares S&P 500 High Quality SPHQ 0.29 398.9 7.02 20.70 15.76
RevenueShares Large Cap RWL 0.49 258.8 6.72 24.29 15.75
First Trust Large Cap Core AlphaDEX FEX 0.66 1,308.4 6.55 22.87 16.47
ProShares S&P 500 Aristocrats NOBL 0.35 250.0 6.37 - -
PowerShares S&P 500 BuyWrite PBP 0.75 378.4 5.76 7.21 2.84
SPDR Dow Jones Industrial Average Trust DIA 0.17 11,861.0 4.41 18.87 14.68
PowerShares S&P 500 Downside Hedged PHDG 0.39 421.7 3.78 - -
Barclays S&P Veqtor ETN VQT 0.95 645.0 3.30 6.88 -
U.S. EQUITY: LARGE CAP GROWTH
Guggenheim S&P 500 Pure Growth RPG 0.35 1,726.5 10.43 26.03 20.53
iShares Morningstar Large-Cap Growth JKE 0.25 570.8 9.84 23.27 16.38
Schwab U.S. Large-Cap Growth SCHG 0.07 1,496.1 9.68 24.07 -
Vanguard S&P 500 Growth VOOG 0.15 334.6 9.40 22.26 -
iShares S&P 500 Growth IVW 0.18 10,572.6 9.29 21.05 14.98
SPDR S&P 500 Growth SPYG 0.20 424.7 9.21 22.31 16.81
iShares Russell Top 200 Growth IWY 0.20 502.2 8.75 22.03 16.42
Vanguard Mega Cap 300 Growth MGK 0.12 1,515.9 8.30 23.27 16.53
Vanguard Russell 1000 Growth VONG 0.15 289.3 8.06 22.39 -
Vanguard Growth VUG 0.09 15,537.8 8.06 23.00 16.68
iShares Russell 1000 Growth IWF 0.20 24,931.5 7.68 22.26 16.34
First Trust Large Cap Growth AlphaDEX FTC 0.70 413.2 6.72 21.20 15.82
PowerShares Dynamic Large Cap Growth PWB 0.59 275.1 6.09 24.24 15.68
U.S. EQUITY: LARGE CAP VALUE
PowerShares Dynamic Large Cap Value PWV 0.59 907.7 8.62 22.16 14.60
Vanguard Mega Cap Value MGV 0.12 856.0 8.45 22.85 14.50
Vanguard Value VTV 0.09 15,413.4 8.11 23.16 14.96
Vanguard Russell 1000 Value VONV 0.15 297.5 7.97 23.83 -
iShares Russell 1000 Value IWD 0.20 23,463.8 7.86 23.75 15.05
Guggenheim S&P 500 Pure Value RPV 0.35 1,326.3 7.56 29.75 19.91
iShares Morningstar Large-Cap Value JKF 0.25 312.4 7.17 20.42 13.25
iShares S&P 500 Value IVE 0.18 8,085.6 7.10 23.31 14.57
First Trust Large Cap Value AlphaDEX FTA 0.67 1,149.6 6.98 23.82 16.94
Schwab U.S. Large-Cap Value SCHV 0.07 1,149.3 6.60 21.94 -
U.S. EQUITY: MID CAP
iShares Morningstar Mid-Cap JKG 0.25 298.6 8.57 24.64 18.30
WisdomTree MidCap Dividend DON 0.38 1,126.4 6.80 22.80 17.52
Vanguard Mid-Cap VO 0.09 8,556.9 6.65 23.40 17.06
iShares Russell Mid-Cap IWR 0.22 10,231.8 6.64 23.59 17.03
Schwab U.S. Mid-Cap SCHM 0.07 1,169.7 4.56 24.15 -
iShares Core S&P Mid-Cap IJH 0.15 23,367.2 3.13 22.38 16.25
Vanguard S&P Mid-Cap 400 IVOO 0.16 329.4 3.05 21.91 -
SPDR S&P MidCap 400 MDY 0.25 14,016.7 2.91 22.11 16.08
WisdomTree MidCap Earnings EZM 0.38 590.8 1.98 24.88 18.23
First Trust Mid Cap Core AlphaDEX FNX 0.66 886.4 -0.01 21.92 16.31
U.S. EQUITY: MID CAP GROWTH
Vanguard Mid-Cap Growth VOT 0.09 2,275.9 6.69 21.84 16.93
iShares Russell Mid-Cap Growth IWP 0.25 4,911.2 5.48 22.60 16.95
iShares S&P Mid-Cap 400 Growth IJK 0.25 4,487.7 1.46 20.23 16.47
Vanguard S&P Mid-Cap 400 Growth IVOG 0.20 280.6 1.44 20.17 -
Guggenheim S&P MidCap 400 Pure Growth RFG 0.35 776.8 -0.19 19.48 17.84
U.S. EQUITY: MID CAP VALUE
iShares Russell Mid-Cap Value IWS 0.28 6,554.8 7.88 24.54 16.99
Vanguard Mid-Cap Value VOE 0.09 3,033.0 6.44 24.73 16.97
iShares S&P Mid-Cap 400 Value IJJ 0.27 4,070.2 4.67 24.41 15.87
U.S. EQUITY: SMALL CAP
Vanguard Small-Cap VB 0.09 8,766.4 0.63 23.65 16.36
Schwab U.S. Small-Cap SCHA 0.08 2,019.6 -0.98 23.44 -
WisdomTree SmallCap Dividend DES 0.38 981.1 -2.40 22.04 15.33
SPDR S&P SmallCap 600 SLY 0.20 313.6 -3.53 22.93 16.25
iShares Core S&P Small-Cap IJR 0.17 12,716.1 -3.60 22.97 16.25
RevenueShares Small Cap RWJ 0.54 274.9 -3.68 24.73 15.77
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
U.S.-LISTED ETFs BY ASSET CLASS AND YEAR-TO-DATE RETURN
› Data as of 9/30/2014› Exp Ratio is annual expense ratio› AUM is net assets in $US millions› YTD is year-to-date› 3YR and 5YR returns are annualized› Includes all U.S.-listed ETFs and ETNs
with assets of $220 million and above› Source: ETF.com
ETFDATA
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
41NOVEMBER 2014
Vanguard Russell 2000 VTWO 0.15 352.2 -4.34 21.29 -
iShares Russell 2000 IWM 0.24 23,992.5 -4.34 21.38 14.37
WisdomTree SmallCap Earnings EES 0.38 403.4 -6.13 22.30 15.07
First Trust Small Cap Core AlphaDEX FYX 0.70 508.0 -7.42 21.56 15.27
PowerShares DWA SmallCap Momentum DWAS 0.60 362.7 -9.57 - -
U.S. EQUITY: SMALL CAP GROWTH
Vanguard Small-Cap Growth VBK 0.09 3,642.0 -1.58 22.01 16.12
iShares Russell 2000 Growth IWO 0.25 5,646.3 -3.82 22.18 15.71
SPDR S&P SmallCap 600 Growth SLYG 0.25 372.2 -4.46 21.73 17.04
iShares S&P Small-Cap 600 Growth IJT 0.25 2,565.7 -4.64 21.70 16.86
U.S. EQUITY: SMALL CAP VALUE
Vanguard Small-Cap Value VBR 0.09 4,256.4 2.46 24.34 15.73
iShares Morningstar Small-Cap Value JKL 0.30 375.2 0.68 23.56 15.94
iShares S&P Small-Cap 600 Value IJS 0.25 2,863.8 -2.57 23.98 15.54
SPDR S&P SmallCap 600 Value SLYV 0.25 286.7 -2.89 23.95 15.41
iShares Russell 2000 Value IWN 0.36 5,473.8 -4.79 20.58 12.94
U.S. EQUITY: MICRO CAP
iShares Micro-Cap IWC 0.72 812.9 -6.75 21.45 12.27
U.S. EQUITY: BASIC MATERIALS
Materials Select SPDR XLB 0.16 5,085.5 8.72 21.86 12.61
iShares U.S. Basic Materials IYM 0.45 920.5 6.79 17.46 11.47
Vanguard Materials VAW 0.14 1,294.0 6.71 22.02 13.75
First Trust Materials AlphaDEX FXZ 0.70 663.8 0.00 21.26 12.98
SPDR S&P Metals and Mining XME 0.35 500.1 -11.70 -5.05 -3.14
U.S. EQUITY: CONSUMER CYCLICALS
iShares U.S. Consumer Services IYC 0.45 504.0 3.19 26.39 20.37
First Trust Consumer Discretionary AlphaDEX FXD 0.70 1,384.2 0.83 21.99 17.81
Consumer Discretionary Select SPDR XLY 0.16 6,719.4 0.76 26.14 21.25
Vanguard Consumer Discretionary VCR 0.14 1,259.5 0.41 26.53 21.34
SPDR S&P Retail XRT 0.35 569.1 -2.27 24.30 21.64
iShares U.S. Home Construction ITB 0.45 1,445.6 -9.16 36.69 13.45
SPDR S&P Homebuilders XHB 0.35 1,452.9 -10.75 31.67 15.69
U.S. EQUITY: CONSUMER NON-CYCLICALS
First Trust Consumer Staples AlphaDEX FXG 0.70 1,462.0 10.75 21.18 18.06
PowerShares Dynamic Food & Beverage PBJ 0.63 245.7 8.82 17.21 15.71
Consumer Staples Select SPDR XLP 0.16 7,438.2 6.89 18.30 15.31
Vanguard Consumer Staples VDC 0.14 1,964.5 6.74 18.46 15.72
iShares U.S. Consumer Goods IYK 0.45 473.7 4.62 18.78 15.84
U.S. EQUITY: ENERGY
Barclays ETN+ Select MLP ETN ATMP 0.95 399.0 20.21 - -
iPath S&P MLP ETN IMLP 0.80 773.0 20.15 - -
ETRACS Alerian MLP Infrastructure ETN MLPI 0.85 2,328.1 19.96 18.04 -
ETRACS Alerian MLP ETN AMU 0.80 354.1 18.95 - -
First Trust North American Energy Infrastructure EMLP 0.95 866.6 18.44 - -
Credit Suisse Cushing 30 MLP ETN MLPN 0.85 941.1 16.67 19.93 -
Alerian MLP AMLP 8.56 9,610.6 12.90 14.84 -
iShares U.S. Oil & Gas Exploration/Production IEO 0.45 534.5 6.41 20.47 12.17
PowerShares DWA Energy Momentum PXI 0.66 245.9 4.81 23.03 18.42
Energy Select SPDR XLE 0.16 10,282.8 3.89 17.94 12.96
Vanguard Energy VDE 0.14 3,259.3 3.71 17.05 12.23
iShares U.S. Energy IYE 0.45 1,134.1 3.43 17.01 11.90
First Trust Energy AlphaDEX FXN 0.70 424.1 3.31 16.50 10.74
iShares U.S. Oil Equipment & Services IEZ 0.45 530.6 3.25 16.23 10.78
Yorkville High Income MLP YMLP 4.65 330.1 2.46 - -
SPDR S&P Oil & Gas Exploration & Production XOP 0.35 1,301.0 1.06 18.38 13.24
SPDR S&P Oil & Gas Equipment & Services XES 0.35 250.9 -7.51 13.18 8.48
First Trust ISE-Revere Natural Gas FCG 0.60 407.4 -7.92 4.67 1.85
U.S. EQUITY: FINANCIALS
Financial Select SPDR XLF 0.16 18,519.3 7.25 27.52 10.87
Vanguard Financials VFH 0.19 2,204.1 5.86 25.76 11.34
iShares U.S. Financials IYF 0.45 1,293.2 5.57 25.93 11.38
PowerShares KBW Bank KBWB 0.35 233.6 4.54 - -
PowerShares KBW High Dividend Yield Financial KBWD 1.55 260.2 3.99 15.94 -
iShares U.S. Financial Services IYG 0.45 571.8 3.70 29.77 10.35
iShares U.S. Broker-Dealers IAI 0.45 239.4 2.40 27.87 7.62
First Trust Financials AlphaDEX FXO 0.70 919.5 1.60 23.63 12.62
iShares U.S. Regional Banks IAT 0.45 472.0 1.36 24.70 11.46
SPDR S&P Insurance KIE 0.35 292.9 0.93 27.81 13.67
SPDR S&P Bank KBE 0.35 2,569.9 -2.75 24.46 8.01
SPDR S&P Regional Banking KRE 0.35 2,244.4 -5.73 27.51 14.06
U.S. EQUITY: HEALTH CARE
First Trust NYSE Arca Biotechnology FBT 0.60 1,549.7 32.67 40.74 26.85
PowerShares Dynamic Biotech & Genome PBE 0.63 394.9 25.53 36.61 22.21
SPDR S&P Pharmaceuticals XPH 0.35 969.6 21.10 34.66 26.48
SPDR S&P Biotech XBI 0.35 1,199.5 20.96 38.69 24.17
iShares Nasdaq Biotechnology IBB 0.48 5,465.4 20.72 43.66 27.83
iShares U.S. Pharmaceuticals IHE 0.45 737.5 20.11 30.43 23.42
Market Vectors Biotech BBH 0.35 539.4 19.57 - -
PowerShares Dynamic Pharmaceuticals PJP 0.63 1,256.5 19.45 37.78 29.83
Guggenheim S&P Equal Weight Health Care RYH 0.40 335.1 17.31 28.77 20.88
Health Care Select SPDR XLV 0.16 11,136.3 16.53 28.72 19.63
iShares U.S. Healthcare IYH 0.45 2,658.2 16.30 29.13 19.72
First Trust Health Care AlphaDEX FXH 0.70 2,405.0 16.06 29.77 23.49
Vanguard Health Care VHT 0.14 3,429.6 15.72 29.36 20.05
Fidelity MSCI Health Care FHLC 0.12 237.2 15.45 - -
iShares U.S. Healthcare Providers IHF 0.45 614.2 14.75 28.24 20.91
iShares U.S. Medical Devices IHI 0.45 735.6 7.59 21.49 15.06
U.S. EQUITY: INDUSTRIALS
iShares Transportation Average IYT 0.45 1,471.2 15.12 27.52 18.48
SPDR S&P Transportation XTN 0.35 274.2 14.79 34.57 -
First Trust Industrials/Producer Durables AlphaDEX FXR 0.70 1,210.7 4.06 26.26 16.78
Industrial Select SPDR XLI 0.16 8,562.3 3.09 24.75 17.48
iShares U.S. Aerospace & Defense ITA 0.44 338.6 2.86 27.59 19.21
Vanguard Industrials VIS 0.14 1,846.5 1.39 25.60 17.24
iShares U.S. Industrials IYJ 0.45 1,748.7 0.75 24.50 16.80
U.S. EQUITY: TECHNOLOGY
iShares PHLX Semiconductor SOXX 0.48 538.2 20.43 25.24 15.48
Market Vectors Semiconductor SMH 0.35 420.0 20.41 - -
First Trust NASDAQ-100-Technology QTEC 0.60 271.4 16.72 24.72 17.26
iShares U.S. Technology IYW 0.45 4,115.2 14.89 20.77 15.14
Technology Select SPDR XLK 0.16 13,866.3 13.13 21.36 15.75
Fidelity MSCI Information Technology FTEC 0.12 223.9 11.98 - -
Vanguard Information Technology VGT 0.14 5,847.7 11.77 22.14 15.91
Guggenheim S&P Equal Weight Technology RYT 0.40 620.4 11.07 24.50 16.16
iShares North American Tech IGM 0.48 742.8 9.96 22.09 15.65
SPDR Morgan Stanley Technology MTK 0.50 227.6 9.05 21.74 13.75
First Trust Technology AlphaDEX FXL 0.70 836.1 8.95 21.36 15.08
iShares North American Multimedia Networking IGN 0.48 277.4 6.74 12.24 5.76
iShares North American Tech-Software IGV 0.48 1,050.2 5.62 18.79 14.94
First Trust Dow Jones Internet FDN 0.60 1,771.9 1.74 27.70 21.57
PowerShares NASDAQ Internet PNQI 0.60 314.2 -0.13 29.21 23.73
U.S. EQUITY: TELECOMMUNICATIONS
Vanguard Telecommunication Services VOX 0.14 749.1 4.35 17.00 13.47
iShares U.S. Telecommunications IYZ 0.45 574.7 2.39 14.66 10.24
U.S. EQUITY: UTILITIES
Utilities Select SPDR XLU 0.16 5,483.0 13.74 12.08 11.88
iShares U.S. Utilities IDU 0.45 652.5 12.45 12.49 12.17
Vanguard Utilities VPU 0.14 1,668.4 12.39 12.65 12.34
U.S. EQUITY: REAL ESTATE
iShares Residential Real Estate Capped REZ 0.48 224.9 16.41 13.54 16.49
iShares Cohen & Steers REIT ICF 0.35 2,862.2 15.69 14.87 15.27
Schwab U. S. REIT SCHH 0.07 967.8 14.53 16.07 -
SPDR Dow Jones REIT RWR 0.25 2,620.1 14.52 15.92 15.53
Vanguard REIT VNQ 0.10 23,058.4 14.11 14.79 13.15
iShares U.S. Real Estate IYR 0.45 4,679.3 12.91 15.35 14.45
iShares Mortgage Real Estate Capped REM 0.48 1,215.4 11.91 11.83 7.13
U.S. EQUITY: ALPHA-SEEKING
Market Vectors Morningstar Wide Moat MOAT 0.49 853.7 8.56 - -
PowerShares DWA Momentum PDP 0.74 1,309.4 7.43 22.09 17.64
First Trust US IPO FPX 0.60 528.8 6.58 32.43 22.08
PowerShares Buyback Achievers PKW 0.71 2,739.3 4.61 25.16 19.33
Global X Guru GURU 0.75 491.2 2.75 - -
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR % FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
42 ETF.com/ETF Report
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR % FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
Guggenheim Raymond James SB-1 Equity RYJ 0.83 255.3 0.66 23.88 17.11
U.S. EQUITY: HIGH DIVIDEND YIELD
WisdomTree Equity Income DHS 0.38 905.9 9.96 19.62 16.25
iShares Core High Dividend HDV 0.12 4,433.0 9.71 18.57 -
First Trust Morningstar Dividend Leaders FDL 0.45 790.9 9.34 17.25 16.32
Vanguard High Dividend Yield VYM 0.10 9,099.3 8.77 21.75 16.03
PowerShares High Yield Equity Dividend Achievers PEY 0.57 432.3 7.86 19.51 14.96
Schwab US Dividend Equity SCHD 0.07 2,121.5 7.34 - -
First Trust Value Line Dividend FVD 0.70 917.5 7.04 19.09 15.01
PowerShares Dividend Achievers PFM 0.58 354.1 6.17 18.28 14.28
iShares Select Dividend DVY 0.39 13,926.2 6.02 19.34 16.41
SPDR S&P Dividend SDY 0.35 12,668.3 4.96 19.60 15.03
Vanguard Dividend Appreciation VIG 0.10 19,920.4 3.78 19.05 14.08
GLOBAL EQUITY
iShares MSCI All Country World Minimum Volatility ACWV 0.34 1,253.4 6.04 - -
iShares MSCI ACWI ACWI 0.34 6,422.3 3.65 17.36 9.98
Vanguard Total World Stock VT 0.18 3,604.0 3.48 17.54 10.21
iShares Global 100 IOO 0.40 1,745.6 2.79 16.64 8.94
GLOBAL EQUITY EX-U.S.
FlexShares International Quality Dividend IQDF 0.47 267.5 0.63 - -
Vident International Equity VIDI 0.75 716.9 0.50 - -
Vanguard FTSE All-World ex-US Small Cap VSS 0.20 2,015.2 0.26 12.99 8.10
SPDR MSCI ACWI ex-US CWI 0.34 575.5 0.23 12.56 5.81
Vanguard Total International Stock VXUS 0.14 3,159.8 -0.32 12.42 -
Vanguard FTSE All-World ex-US VEU 0.15 12,524.5 -0.49 12.76 5.99
iShares MSCI ACWI ex U.S. ACWX 0.34 1,701.7 -0.70 12.46 5.52
iShares Core MSCI Total International Stock IXUS 0.16 813.9 -0.81 - -
INTERNATIONAL EQUITY: BLENDED DEVELOPMENT
iShares MSCI All Country Asia ex Japan AAXJ 0.67 2,731.1 2.49 11.57 4.83
iShares Asia 50 AIA 0.50 312.5 -1.66 11.70 6.16
First Trust Europe AlphaDex FEP 0.80 701.0 -6.53 14.87 -
INTERNATIONAL EQUITY: DEVELOPED
iShares MSCI Canada EWC 0.51 3,500.8 6.03 8.86 5.92
WisdomTree Europe Hedged Equity HEDJ 0.58 2,851.5 4.30 15.39 -
iShares MSCI Kokusai TOK 0.25 485.5 4.29 18.82 11.53
WisdomTree Japan Hedged Equity DXJ 0.48 10,863.4 4.04 19.70 7.17
iShares MSCI EAFE Minimum Volatility EFAV 0.20 1,135.4 3.82 - -
Deutsche X-trackers MSCI Europe Hedged Equity DBEU 0.45 303.6 3.18 - -
iShares MSCI Singapore EWS 0.53 936.0 2.72 11.02 8.45
PowerShares S&P Intl Dev Low Volatility IDLV 0.25 254.3 2.66 - -
Deutsche X-trackers MSCI EAFE Hedged Equity DBEF 0.35 660.6 2.49 16.61 -
iShares MSCI Spain Capped EWP 0.53 2,349.6 2.22 7.43 -4.36
iShares MSCI Italy Capped EWI 0.50 1,389.2 2.05 10.51 -4.74
WisdomTree Japan SmallCap Dividend DFJ 0.58 300.7 1.69 7.99 6.53
WisdomTree International Dividend ex-Financials DOO 0.58 393.4 1.61 11.87 6.59
iShares MSCI Hong Kong EWH 0.51 3,010.1 1.27 16.20 8.83
Deutsche X-trackers MSCI Japan Hedged Equity DBJP 0.45 562.5 1.13 21.68 -
iShares MSCI Switzerland Capped EWL 0.51 1,236.9 0.81 15.43 8.91
iShares MSCI Pacific ex Japan EPP 0.50 3,141.2 0.14 12.57 6.80
WisdomTree International LargeCap Dividend DOL 0.48 339.4 -0.19 14.06 6.13
iShares MSCI Australia EWA 0.51 1,812.6 -0.29 11.57 5.93
WisdomTree DEFA DWM 0.48 578.8 -0.58 14.02 6.73
iShares MSCI EAFE Value EFV 0.40 2,604.7 -1.48 14.34 5.37
SPDR S&P World ex-US GWL 0.34 825.4 -1.52 13.43 6.42
Schwab International Equity SCHF 0.08 2,660.4 -1.62 13.51 -
Schwab International Small-Cap Equity SCHC 0.19 383.5 -1.82 13.51 -
Vanguard FTSE Pacific VPL 0.12 2,739.4 -1.83 10.88 6.18
Vanguard FTSE Developed Markets VEA 0.09 23,068.9 -1.95 14.27 6.55
iShares MSCI EAFE EFA 0.34 53,611.5 -2.09 14.05 6.47
FlexShares Mstar Dev Mkts ex-US Factor Tilt TLTD 0.42 655.7 -2.09 - -
SPDR STOXX Europe 50 FEU 0.29 261.7 -2.10 14.45 4.93
SPDR S&P International Small Cap GWX 0.59 792.8 -2.25 12.63 7.78
iShares Core MSCI EAFE IEFA 0.14 2,586.3 -2.36 - -
iShares MSCI Japan EWJ 0.50 14,397.9 -2.38 9.41 5.16
iShares Europe IEV 0.60 3,123.3 -2.40 16.07 6.46
iShares MSCI United Kingdom EWU 0.51 4,068.9 -2.62 14.27 8.47
Vanguard FTSE Europe VGK 0.12 14,223.5 -2.65 16.30 6.99
iShares MSCI EAFE Growth EFG 0.40 1,638.5 -3.31 13.64 7.35
SPDR Euro STOXX 50 FEZ 0.29 4,977.4 -3.54 16.18 2.95
WisdomTree International SmallCap Dividend DLS 0.58 930.8 -3.73 15.17 9.75
iShares MSCI EAFE Small-Cap SCZ 0.40 3,672.6 -3.81 14.99 9.12
iShares MSCI France EWQ 0.51 250.5 -4.72 15.18 3.37
iShares MSCI Sweden EWD 0.51 394.0 -5.00 16.98 10.97
iShares MSCI EMU EZU 0.50 8,485.3 -5.17 15.63 3.31
WisdomTree Europe SmallCap Dividend DFE 0.58 1,017.0 -7.30 21.18 11.26
iShares MSCI Germany EWG 0.51 4,818.4 -11.02 17.56 6.82
INTERNATIONAL EQUITY: EMERGING
Market Vectors India Small-Cap SCIF 0.93 303.7 39.24 -1.72 -
WisdomTree India Earnings EPI 0.83 1,992.2 27.03 7.52 1.69
iShares India 50 INDY 0.94 672.0 26.63 10.59 -
iShares MSCI Thailand Capped THD 0.61 565.4 24.16 17.35 15.59
iPath MSCI India ETN INP 0.89 385.5 23.24 9.29 3.57
iShares MSCI India INDA 0.67 1,479.5 22.61 - -
iShares MSCI Philippines EPHE 0.61 363.9 21.31 22.75 -
iShares MSCI Indonesia EIDO 0.61 540.4 20.49 3.31 -
Market Vectors Indonesia IDX 0.57 225.6 17.59 2.73 7.07
SPDR S&P Emerging Asia Pacific GMF 0.59 687.5 9.21 12.20 6.70
EGShares Beyond BRICs BBRC 0.58 286.3 8.12 - -
iShares MSCI Taiwan EWT 0.61 3,070.2 5.89 11.92 6.84
iShares MSCI Turkey TUR 0.61 442.3 4.61 3.02 1.58
Deutsche X-trackers CSI 300 China A-Shrs ASHR 0.82 526.2 4.50 - -
SPDR S&P Emerging Markets Small Cap EWX 0.65 608.6 4.01 11.19 4.91
iShares MSCI Emerging Markets Minimum Volatility EEMV 0.25 1,991.3 3.86 - -
Vanguard FTSE Emerging Markets VWO 0.15 46,903.1 3.70 8.70 4.24
SPDR S&P Emerging Markets GMM 0.59 285.3 3.67 8.50 4.69
Schwab Emerging Markets Equity SCHE 0.14 1,211.6 3.25 7.96 -
iShares MSCI All Peru Capped EPU 0.61 288.0 2.87 1.63 3.62
WisdomTree Emerging Markets SmallCap Dividend DGS 0.63 1,939.4 2.69 9.62 6.14
iShares MSCI Mexico Capped EWW 0.50 3,048.5 1.40 13.60 11.04
iShares Core MSCI Emerging Markets IEMG 0.18 5,705.7 1.33 - -
PowerShares FTSE RAFI Emerging Markets PXH 0.49 382.1 1.10 5.02 1.10
iShares Latin America 40 ILF 0.50 1,164.9 0.57 1.15 -0.31
FlexShares Mstar Emerging Markets Factor Tilt TLTE 0.65 256.7 0.40 - -
iShares MSCI South Africa EZA 0.61 462.5 0.36 7.32 6.23
iShares MSCI Emerging Markets EEM 0.67 39,256.5 0.22 7.87 3.18
iShares MSCI BRIC BKF 0.67 364.1 0.03 5.64 -0.28
PowerShares S&P Emerging Markets Low Volatility EELV 0.29 233.3 -0.08 - -
iShares MSCI China MCHI 0.61 1,163.6 -0.18 12.03 -
SPDR S&P China GXC 0.59 947.6 -0.36 13.74 4.84
PowerShares Golden Dragon China PGJ 0.70 291.6 -0.41 17.84 7.01
iShares MSCI Brazil Capped EWZ 0.61 5,099.4 -0.81 -4.80 -7.88
iShares MSCI Malaysia EWM 0.51 742.0 -1.04 11.71 11.97
First Trust Emerging Markets AlphaDex FEM 0.80 424.7 -2.15 6.82 -
iShares MSCI Poland Capped EPOL 0.61 286.4 -3.51 8.13 -
iShares MSCI South Korea Capped EWY 0.61 4,724.5 -6.43 9.68 5.32
iShares MSCI Chile Capped ECH 0.61 318.9 -9.00 -6.67 -2.01
iShares MSCI Russia Capped ERUS 0.61 276.2 -20.86 -0.92 -
Market Vectors Russia RSX 0.63 1,853.6 -22.51 -1.53 -2.74
INTERNATIONAL EQUITY: FRONTIER
Market Vectors Vietnam VNM 0.72 601.4 16.55 11.79 -3.50
iShares MSCI Frontier 100 FM 0.79 810.5 14.68 - -
GLOBAL EQUITY: SECTOR
Market Vectors Pharmaceutical PPH 0.35 402.7 21.01 - -
Guggenheim Solar TAN 0.70 395.3 15.55 14.75 -13.09
iShares Global Healthcare IXJ 0.48 1,265.0 14.66 26.01 17.51
First Trust Nasdaq Technology Dividend TDIV 0.50 676.2 12.15 - -
iShares Global Tech IXN 0.48 749.6 10.51 20.19 12.99
iShares Global Infrastructure IGF 0.48 977.0 10.51 14.53 8.96
iShares Global Utilities JXI 0.48 232.0 10.26 9.45 4.46
SPDR Dow Jones Global Real Estate RWO 0.50 1,464.3 9.26 15.16 11.78
FlexShares STOXX Global Broad Infrastructure NFRA 0.47 222.8 8.81 - -
43NOVEMBER 2014
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR % FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
Market Vectors Junior Gold Miners GDXJ 0.55 2,319.2 8.28 -27.81 -
iShares North American Natural Resources IGE 0.48 2,213.9 4.20 11.94 8.29
First Trust ISE Cloud Computing SKYY 0.60 341.8 3.24 19.89 -
Market Vectors Oil Services OIH 0.35 1,245.2 3.20 - -
iShares Global Consumer Staples KXI 0.48 600.9 3.11 15.16 13.09
iShares Global Energy IXC 0.48 1,000.9 2.69 12.65 7.74
iShares Global Financials IXG 0.48 312.6 1.53 20.89 5.99
iShares Global Telecom IXP 0.48 468.7 1.42 12.54 9.49
Market Vectors Gold Miners GDX 0.52 6,680.1 1.07 -26.65 -13.57
FlexShares Mstar Glb Upstream Natural Resources GUNR 0.48 2,964.7 0.26 5.19 -
Guggenheim S&P Global Water CGW 0.70 350.0 -0.40 16.83 11.00
PowerShares Global Water PIO 0.75 280.9 -0.49 14.22 5.87
iShares Global Industrials EXI 0.48 280.9 -0.69 19.57 12.36
SPDR Global Natural Resources GNR 0.40 568.9 -1.79 4.65 -
iShares Global Materials MXI 0.48 357.3 -2.75 6.16 3.51
Market Vectors Agribusiness MOO 0.55 1,589.3 -2.94 8.65 7.83
iShares Global Timber & Forestry WOOD 0.48 284.9 -5.62 14.98 8.60
PowerShares Water Resources PHO 0.62 918.4 -5.73 18.19 8.20
PowerShares Global Listed Private Equity PSP 2.19 554.9 -6.05 17.86 6.03
Guggenheim Timber CUT 0.70 224.0 -9.23 15.84 8.33
Global X Uranium URA 0.69 238.5 -15.06 -17.98 -
GLOBAL EX-U.S. EQUITY: SECTOR
SPDR Dow Jones International Real Estate RWX 0.59 4,902.1 3.11 14.72 9.28
Vanguard Global ex-U.S. Real Estate VNQI 0.27 2,110.0 1.44 15.11 -
iShares International Developed Real Estate IFGL 0.48 792.0 0.06 13.92 7.71
INTERNATIONAL EQUITY: DEVELOPED SECTOR
iShares MSCI Europe Financials EUFN 0.48 455.6 -3.93 18.86 -
INTERNATIONAL EQUITY: EMERGING SECTOR
EGShares Emerging Markets Consumer ECON 0.85 1,266.9 -2.42 10.35 -
GLOBAL EQUITY: HIGH DIVIDEND YIELD
Global X SuperDividend SDIV 0.58 1,071.3 6.23 15.03 -
First Trust Dow Jones Global Select Dividend FGD 0.60 562.1 1.43 9.71 5.31
GLOBAL EX-U.S. EQUITY: HIGH DIVIDEND YIELD
PowerShares International Dividend Achievers PID 0.56 1,347.3 3.55 13.88 9.85
SPDR S&P International Dividend DWX 0.45 1,450.1 1.27 7.78 3.20
INTERNATIONAL EQUITY: HIGH DIVIDEND YIELD
WisdomTree DEFA Equity Income DTH 0.58 326.7 0.22 14.23 6.07
iShares International Select Dividend IDV 0.50 4,359.9 -1.77 13.76 7.79
WisdomTree Emerging Markets Equity Income DEM 0.63 3,437.1 -2.77 4.40 4.19
SPDR S&P Emerging Markets Dividend EDIV 0.59 491.2 -2.87 -0.55 -
iShares Emerging Markets Dividend DVYE 0.49 281.9 -3.90 - -
GLOBAL EQUITY: ALPHA SEEKING
First Trust Dorsey Wright Focus 5 FV 0.95 544.6 - - -
INTERNATIONAL EQUITY: ALPHA SEEKING
PowerShares DWA Emerging Markets Momentum PIE 0.90 407.0 2.83 10.35 7.11
PowerShares DWA Developed Markets Momentum PIZ 0.80 504.4 -6.86 16.96 7.63
U.S. FIXED INCOME: BROAD MARKET - BROAD MATURITIES
Schwab U.S. Aggregate Bond SCHZ 0.06 866.3 4.35 2.26 -
Vanguard Total Bond Market BND 0.08 22,006.1 4.12 2.35 3.98
iShares Core U.S. Aggregate Bond AGG 0.08 18,853.5 4.04 2.30 3.85
SPDR Barclays Aggregate Bond LAG 0.16 737.5 3.99 2.25 3.96
U.S. FIXED INCOME: BROAD MARKET - SHORT-TERM
iShares Short Maturity Bond NEAR 0.25 361.1 0.67 - -
PIMCO Enhanced Short Maturity Strategy MINT 0.35 3,694.4 0.39 1.02 -
U.S. FIXED INCOME: GOVERNMENT/CREDIT - SHORT-TERM
Vanguard Short-Term Bond BSV 0.10 14,793.0 0.96 1.16 2.03
U.S. FIXED INCOME: GOVERNMENT/CREDIT - INTERMEDIATE
Vanguard Intermediate-Term Bond BIV 0.10 4,166.5 5.15 3.24 5.52
iShares Intermediate Government/Credit Bond GVI 0.20 1,427.3 1.93 1.70 3.07
U.S. FIXED INCOME: GOVERNMENT/CREDIT - LONG-TERM
Vanguard Long-Term Bond BLV 0.10 854.8 13.60 4.64 7.92
U.S. FIXED INCOME: GOVERNMENT
Vanguard Short-Term Government Bond VGSH 0.12 505.4 0.31 0.38 -
U.S. FIXED INCOME: TREASURY - BROAD MATURITIES
PowerShares 1-30 Laddered Treasury PLW 0.25 268.6 9.10 1.49 5.29
U.S. FIXED INCOME: TREASURY - SHORT TERM
iShares 1-3 Year Treasury Bond SHY 0.15 8,220.9 0.37 0.33 0.89
Schwab Short-Term U. S. Treasury SCHO 0.08 598.8 0.32 0.36 -
SPDR Barclays 1-3 Month T-Bill BIL 0.13 947.0 -0.02 0.14 0.08
iShares Short Treasury Bond SHV 0.15 2,348.5 - 0.01 0.05
U.S. FIXED INCOME: TREASURY - INTERMEDIATE
iShares 7-10 Year Treasury Bond IEF 0.15 4,897.4 5.91 1.45 4.91
Schwab Intermediate-Term U.S. Treasury SCHR 0.10 229.9 2.61 1.02 -
iShares 3-7 Year Treasury Bond IEI 0.15 3,407.1 1.88 0.92 3.12
U.S. FIXED INCOME: TREASURY - LONG-TERM
Vanguard Extended Duration Treasury EDV 0.12 256.2 26.33 1.82 8.82
iShares 20+ Year Treasury Bond TLT 0.15 4,010.3 16.46 1.66 6.91
iShares 10-20 Year Treasury Bond TLH 0.15 312.5 9.36 1.81 5.93
U.S. FIXED INCOME: AGENCIES
iShares Agency Bond AGZ 0.20 365.2 2.49 1.15 2.17
U.S. FIXED INCOME: AGENCY MBS
iShares MBS MBB 0.27 6,288.5 4.46 1.78 3.27
Vanguard Mortgage-Backed Securities VMBS 0.12 557.0 4.19 2.07 -
U.S. FIXED INCOME: TIPS
SPDR Barclays TIPS IPE 0.18 596.3 4.18 1.17 4.38
Schwab U.S. TIPS SCHP 0.07 489.9 3.89 1.16 -
iShares TIPS Bond TIP 0.20 12,438.7 3.59 1.21 4.31
FlexShares iBoxx 5-Year Target Duration TIPS TDTF 0.20 307.2 0.82 0.67 -
iShares 0-5 Year TIPS Bond STIP 0.20 517.5 0.25 0.44 -
PIMCO 1-5 Year U.S. TIPS STPZ 0.20 1,409.7 0.16 0.46 2.04
Vanguard Short-Term Inflation-Protected Sec VTIP 0.10 1,336.0 0.08 - -
FlexShares iBoxx 3-Year Target Duration TIPS TDTT 0.20 2,235.3 -0.10 0.20 -
U.S. FIXED INCOME: MUNICIPAL - BROAD MARKET
PowerShares National AMT-Free Municipal Bond PZA 0.28 706.2 12.90 5.49 5.20
iShares California AMT-Free Muni Bond CMF 0.25 303.1 9.42 5.41 5.06
SPDR Nuveen Barclays Municipal Bond TFI 0.23 1,079.3 8.19 4.36 4.35
iShares National AMT-Free Muni Bond MUB 0.25 3,659.3 7.75 3.96 4.00
U.S. FIXED INCOME: MUNICIPAL - SHORT-TERM
Market Vectors Short Municipal SMB 0.20 258.4 2.72 2.06 2.49
SPDR Nuveen Barclays Short Term Municipal Bond SHM 0.20 2,351.1 1.09 1.29 1.73
iShares Short-Term National AMT-Free Muni Bond SUB 0.25 907.8 0.47 0.79 1.10
U.S. FIXED INCOME: MUNICIPAL - INTERMEDIATE
Market Vectors Intermediate Municipal ITM 0.24 733.6 8.96 4.50 4.66
U.S. FIXED INCOME: MUNICIPAL - HIGH YIELD
Market Vectors High-Yield Municipal HYD 0.35 1,228.1 21.47 9.80 7.49
SPDR Nuveen S&P High Yield Municipal Bond HYMB 0.45 295.7 14.88 8.13 -
U.S. FIXED INCOME: MUNICIPAL - BUILD AMERICA BONDS
PowerShares Build America Bond BAB 0.28 682.7 12.67 6.08 -
U.S. FIXED INCOME: CORPORATE - INVESTMENT GRADE - BROAD MATURITIES
iShares iBoxx $ Investment Grade Corporate Bond LQD 0.15 17,377.0 5.94 5.68 6.48
PIMCO Investment Grade Corporate Bond CORP 0.20 238.3 5.89 5.23 -
iShares Core U.S. Credit Bond CRED 0.15 728.8 5.67 4.45 5.55
iShares Aaa - A Rated Corporate Bond QLTA 0.15 418.9 4.48 - -
U.S. FIXED INCOME: CORPORATE - INVESTMENT GRADE - SHORT-TERM
Guggenheim BulletShares 2017 Corporate Bond BSCH 0.24 688.4 1.51 4.95 -
Vanguard Short-Term Corporate Bond VCSH 0.12 8,580.8 1.31 3.10 -
Guggenheim BulletShares 2016 Corporate Bond BSCG 0.24 657.5 0.93 4.01 -
SPDR Barclays Short Term Corporate Bond SCPB 0.12 3,685.5 0.78 1.93 -
iShares 1-3 Year Credit Bond CSJ 0.20 11,355.4 0.44 1.74 1.96
Guggenheim BulletShares 2015 Corporate Bond BSCF 0.24 647.2 -0.02 2.93 -
Guggenheim BulletShares 2014 Corporate Bond BSCE 0.24 345.8 -0.47 1.70 -
U.S. FIXED INCOME: CORPORATE - INVESTMENT GRADE - INTERMEDIATE
Vanguard Intermediate-Term Corporate Bond VCIT 0.12 3,998.2 5.94 5.71 -
SPDR Barclays Intermediate Term Corporate Bond ITR 0.15 466.4 3.40 4.24 4.80
iShares Intermediate Credit Bond CIU 0.20 6,212.9 3.02 3.77 4.61
Guggenheim BulletShares 2018 Corporate Bond BSCI 0.24 410.7 2.15 - -
U.S. FIXED INCOME: CORPORATE - INVESTMENT GRADE - LONG-TERM
iShares 10+ Year Credit Bond CLY 0.20 547.9 12.18 6.14 -
Vanguard Long-Term Corporate Bond VCLT 0.12 886.5 11.13 6.82 -
44 ETF.com/ETF Report
FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR % FUND NAME TICKER EXP RATIO % AUM ($M) YTD % 3YR % 5YR %
U.S. FIXED INCOME: CORPORATE - INVESTMENT GRADE - FLOATING RATE
iShares Floating Rate Bond FLOT 0.20 4,053.0 0.51 1.79 -
SPDR Barclays Investment Grade Floating Rate FLRN 0.15 395.3 0.28 - -
U.S. FIXED INCOME: CORPORATE - HIGH YIELD - BROAD MATURITIES
SPDR Barclays High Yield Bond JNK 0.40 8,776.6 2.89 10.72 9.25
iShares iBoxx $ High Yield Corporate Bond HYG 0.50 12,412.1 2.76 10.38 8.75
PowerShares Fundamental HiYld Corporate Bond PHB 0.50 612.2 2.58 7.86 7.55
AdvisorShares Peritus High Yield HYLD 1.25 756.4 2.11 11.08 -
U.S. FIXED INCOME: CORPORATE - HIGH YIELD - SHORT-TERM
Guggenheim BulletShares 2016 HiYld Corp Bond BSJG 0.42 614.6 1.12 - -
Guggenheim BulletShares 2015 HiYld Corp Bond BSJF 0.42 1,019.0 1.05 7.99 -
PIMCO 0-5 Year High Yield Corporate Bond HYS 0.55 3,930.1 0.53 8.62 -
Guggenheim BulletShares 2014 HiYd Corp Bond BSJE 0.42 454.6 0.44 6.67 -
SPDR Barclays Short Term High Yield Bond SJNK 0.40 3,927.5 0.41 - -
U.S. FIXED INCOME: CORPORATE - HIGH YIELD - INTERMEDIATE
Guggenheim BulletShares 2018 HiYld Corp Bond BSJI 0.42 271.5 1.84 - -
Guggenheim BulletShares 2017 HiYld Corp Bond BSJH 0.42 362.6 1.20 - -
U.S. FIXED INCOME: CORPORATE - CONVERTIBLES
SPDR Barclays Convertible Securities CWB 0.40 2,940.1 7.94 16.36 11.11
U.S. FIXED INCOME: CORPORATE - LOANS
PowerShares Senior Loan BKLN 0.65 6,596.9 0.57 6.60 -
U.S. FIXED INCOME: CORPORATE - PREFERRED STOCK
SPDR Wells Fargo Preferred Stock PSK 0.45 252.2 14.16 7.49 7.98
PowerShares Preferred PGX 0.50 2,259.3 12.68 8.90 8.32
iShares U.S. Preferred Stock PFF 0.48 10,397.7 11.65 10.17 8.66
PowerShares Financial Preferred PGF 0.64 1,395.3 11.27 10.68 9.85
GLOBAL FIXED INCOME
PIMCO Total Return BOND 0.55 3,553.2 4.82 - -
RiverFront Strategic Income RIGS 0.22 367.7 1.32 - -
Guggenheim Enhanced Short Duration Bond GSY 0.28 717.1 0.63 1.23 0.69
SPDR Blackstone / GSO Senior Loan SRLN 0.70 606.1 0.43 - -
INTERNATIONAL FIXED INCOME: BLENDED DEVELOPMENT
Vanguard Total International Bond BNDX 0.20 1,863.6 6.07 - -
SPDR DB Intl Govt Inflation-Protected Bond WIP 0.50 892.1 2.16 3.84 3.77
WisdomTree Asia Local Debt ALD 0.55 318.5 1.25 0.87 -
SPDR Barclays International Treasury Bond BWX 0.50 2,221.7 0.12 0.69 1.55
SPDR Barclays International Corporate Bond IBND 0.55 311.7 -2.45 4.22 -
INTERNATIONAL FIXED INCOME: DEVELOPED
PowerShares International Corporate Bond PICB 0.50 244.9 0.40 6.51 -
iShares International Treasury Bond IGOV 0.35 541.2 -0.02 0.36 0.74
SPDR Barclays Short Term Intl Treasury Bond BWZ 0.35 265.8 -5.03 -2.05 -0.93
INTERNATIONAL FIXED INCOME: EMERGING
PowerShares Emerging Markets Sovereign Debt PCY 0.50 2,328.8 9.07 7.85 7.12
iShares J.P. Morgan USD Emerging Mrkts Bond EMB 0.60 4,422.2 7.35 7.01 6.78
Market Vectors Emerging Markets HiYld Bond HYEM 0.40 432.6 6.30 - -
Vanguard Emerging Markets Government Bond VWOB 0.35 220.1 5.86 - -
iShares China Large-Cap FXI 0.73 5,504.8 1.23 10.23 0.90
iShares Emerging Markets Local Currency Bond LEMB 0.60 583.4 1.12 - -
Market Vectors Emerging Mrkts Local Currency Bond EMLC 0.47 890.6 0.46 2.52 -
WisdomTree Emerging Markets Local Debt ELD 0.55 778.8 -0.44 1.30 -
COMMODITIES:: BROAD MARKET
United States Commodity USCI 0.88 834.9 -1.77 -1.79 -
GreenHaven Continuous Commodity GCC 1.03 321.0 -3.70 -6.59 0.64
iPath Dow Jones-UBS Commodity Total Return ETN DJP 0.75 1,473.8 -6.48 -6.29 -2.28
iShares S&P GSCI Commodity GSG 0.73 979.3 -8.08 -0.67 -0.06
PowerShares DB Commodity Tracking DBC 0.88 4,997.2 -9.51 -3.40 1.03
COMMODITIES:: AGRICULTURE
PowerShares DB Agriculture DBA 0.96 1,164.6 5.36 -4.87 0.07
COMMODITIES:: ENERGY
United States Natural Gas UNG 0.82 739.6 6.86 -15.07 -25.15
PowerShares DB Oil DBO 0.72 243.3 -2.07 5.62 1.76
United States Oil USO 0.72 669.0 -2.58 4.13 -1.01
PowerShares DB Energy DBE 0.71 284.7 -7.65 1.55 2.65
COMMODITITES: INDUSTRIAL METALS
PowerShares DB Base Metals DBB 0.71 329.5 0.30 -3.05 -1.55
COMMODITIES: PRECIOUS METALS
ETFS Physical Palladium PALL 0.60 444.4 7.99 7.84 -
iShares Gold Trust IAU 0.25 6,395.4 0.17 -9.62 3.42
ETFS Physical Swiss Gold SGOL 0.39 1,025.7 0.10 -9.76 3.30
SPDR Gold GLD 0.40 30,190.5 0.08 -9.78 3.29
ETFS Physical Platinum PPLT 0.60 694.9 -5.68 -5.66 -
ETFS Physical Silver SIVR 0.30 320.1 -12.60 -17.22 0.13
iShares Silver Trust SLV 0.50 5,917.6 -12.61 -17.37 -0.04
CURRENCY: DEVELOPED
CurrencyShares Australian Dollar FXA 0.40 258.1 -0.62 -0.93 2.75
CurrencyShares Canadian Dollar FXC 0.40 258.0 -4.99 -2.02 -0.83
ASSET ALLOCATION
First Trust Multi-Asset Diversified Income MDIV 0.68 779.6 7.76 - -
PowerShares CEF Income Composite PCEF 1.77 618.7 6.00 10.61 -
iShares Growth Allocation AOR 0.30 317.6 3.70 12.60 9.11
iShares Aggressive Allocation AOA 0.30 273.3 3.37 16.83 11.69
iShares Moderate Allocation AOM 0.31 254.7 2.92 8.61 6.81
Guggenheim Multi-Asset Income CVY 0.82 1,299.8 1.86 15.23 13.45
ALTERNATIVES: ABSOLUTE RETURN
IQ Hedge Multi-Strategy Tracker QAI 0.94 855.5 2.42 4.58 3.12
ALTERNATIVES: TACTICAL TOOLS
iPath S&P 500 VIX Short-Term Futures ETN VXX 0.89 1,482.2 -26.72 -66.97 -60.45
LEVERAGED
ETRACS 2X Monthly Lev Long Alerian MLP Infrastr ETN MLPL 0.85 312.0 39.80 47.37 -
ProShares Ultra QQQ QLD 0.95 904.2 26.43 51.57 37.82
ProShares Ultra Real Estate URE 0.95 257.0 25.97 29.08 24.42
ProShares UltraPro S&P 500 UPRO 0.95 768.2 22.01 72.88 41.03
Direxion Daily S&P 500 Bull 3X SPXL 1.00 368.9 21.69 71.63 47.38
ETRACS Monthly Pay 2x Leve Mortgage REIT ETN MORL 0.40 266.1 21.64 - -
ProShares Ultra S&P 500 SSO 0.90 2,127.4 14.93 46.61 28.69
Direxion Daily Financial Bull 3x FAS 1.00 1,225.1 14.03 80.27 17.84
ProShares Ultra Financials UYG 0.95 786.5 9.82 52.79 17.36
ProShares Ultra Dow30 DDM 0.95 285.9 7.58 37.58 27.34
Barclays ETN+ FI Enhanced Global HiYld ETN FIGY 0.80 1,504.3 7.39 - -
ProShares Ultra MidCap 400 MVV 0.95 773.5 3.48 43.24 28.20
Barclays ETN+ FI Enhanced Europe 50 ETN FEEU 1.00 1,011.0 -3.62 - -
Direxion Daily Emerging Markets Bull 3x EDC 1.10 270.7 -6.34 6.84 -6.91
ETRACS 2X Lev Long Wells Fargo BDC ETN BDCL 0.85 221.5 -9.41 35.46 -
ProShares Ultra Russell 2000 UWM 0.98 524.0 -10.92 40.88 23.32
Direxion Daily Gold Miners Bull 3X NUGT 1.13 641.7 -16.53 -75.08 -
Direxion Daily Small Cap Bull 3x TNA 1.01 949.1 -18.12 57.85 29.45
Direxion Daily Junior Gold Miners Bull 3X JNUG 1.09 233.7 -24.23 - -
VelocityShares 3X Long Natural Gas ETN UGAZ 1.65 233.9 -24.32 - -
ProShares Ultra Silver AGQ 2.02 357.1 -26.79 -39.52 -16.64
ProShares Ultra VIX Short-Term Futures UVXY 1.56 283.5 -55.86 - -
VelocityShares Daily 2X VIX Short Term ETN TVIX 1.65 273.7 -56.67 -92.94 -
INVERSE
ProShares UltraShort Euro EUO 0.93 478.4 17.00 1.17 2.02
VelocityShares Daily Inverse VIX Short Term ETN XIV 1.35 525.7 11.26 91.60 -
ProShares UltraShort Yen YCS 0.93 424.1 6.84 22.47 4.52
PowerShares DB US Dollar Index Bullish UUP 0.73 695.0 6.27 0.84 0.07
ProShares UltraShort Russell 2000 TWM 0.95 342.3 2.29 -40.61 -36.06
ProShares Short Russell 2000 RWM 0.95 945.9 1.78 -21.81 -18.20
ProShares Short MSCI EAFE EFZ 0.95 227.5 0.42 -15.89 -11.28
Direxion Daily Small Cap Bear 3x TZA 1.01 815.0 -0.29 -57.08 -52.94
ProShares Short MSCI Emerging Markets EUM 0.95 233.5 -3.08 -12.60 -9.77
ProShares Short Dow30 DOG 0.95 284.9 -5.55 -17.90 -15.46
ProShares Short S&P 500 SH 0.90 1,641.9 -8.80 -20.75 -16.40
ProShares UltraShort 7-10 Year Treasury PST 0.95 298.8 -12.44 -5.66 -12.76
ProShares Short QQQ PSQ 0.95 257.3 -13.70 -22.76 -19.95
ProShares UltraShort S&P 500 SDS 0.90 1,548.3 -16.82 -37.80 -31.37
Direxion Daily Financial Bear 3x FAZ 1.02 366.1 -22.60 -60.34 -47.52
ProShares UltraPro Short S&P 500 SPXU 0.93 515.2 -24.73 -52.11 -45.14
Direxion Daily S&P 500 Bear 3X Shares SPXS 1.02 253.7 -25.71 -52.72 -46.01
ProShares UltraShort QQQ QID 0.95 383.3 -26.03 -41.27 -37.43
ProShares UltraShort 20+ Year Treasury TBT 0.93 4,256.8 -28.88 -10.23 -20.41
ProShares UltraPro Short QQQ SQQQ 0.95 328.9 -37.44 -56.31 -
Direxion Daily 20 Year Plus Treasury Bear 3x TMV 0.96 592.7 -41.20 -17.98 -32.12
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PowerShares QQQ
• Invests in 100 of the world’s most innovative companies• Provides visibility of holdings throughout the day• Established 15-year track record
PowerShares QQQ was incepted on March 10, 1999 and is based on the Nasdaq-100 Index.® The Index includes 100 of the largest domestic and international nonfi nancial companies listed on the Nasdaq Stock Market based on market capitalization.
There are risks involved with investing inExchange-Traded Funds (ETFs) including possible loss of money. The funds are not actively managed and are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinarybrokerage commissions apply.
Shares are not FDIC insured, may lose value and have no bank guarantee.Shares are not individually redeemable and owners of the shares may acquire those shares from the Funds and tender those shares for redemption to the funds in Creation Unit aggregations only, typically consisting of 50,000 shares.
ALPS Distributors, Inc. is the distributor for PowerShares QQQ which is a unit investment trust. Invesco PowerShares Capital Management LLC is not affi liated with ALPS Distributors, Inc.
An investor should consider the Fund’s Investment objective, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information about the QQQ, a unit investment trust, please contact your broker, call 800.983.0903 or visit www.invescopowershares.com. Please read the prospectus carefullybefore investing.
QQQNASDAQ100
pwr.sh/QQQ | @PowerShares
